Then Khek Koon and another v Arjun Permanand Samtani and another and other suits [2013] SGHC 213

Case Number : Suit No 1084 of 2009 consolidated with Suit No 1085 of 2009 and Suit No 1086of 2009

Decision Date : 18 October 2013

Tribunal/Court : High Court

Coram : Vinodh Coomaraswamy J

Counsel Name(s) : Mr Kannan Ramesh SC, Mr Eddee Ng, Ms Cheryl Koh, Ms Ho Xin Ling, Ms YangSue Jen (Tan Kok Quan Partnership) for the plaintiffs; Mr N Sreenivasan SC, MrShankar s/o Angammah Sevasamy (Straits Law Practice LLC) for the firstdefendant; Mr Subramanian Pillai, Ms Luo Ling Ling, Mr Leow Zi Xiang (Colin Ng &Partners LLP) for the second defendant.

Parties : THEN KHEK KOON — JASMINE TAN KIM LIAN — ARJUN PERMANAND SAMTANI —TAN KAH GEE — RUDY DARMAWAN — WIDIA SETEONO — MARYANI SADELI

Equity – Remedies – Equitable Compensation

Damages – Recovery of Legal Costs

18 October 2013 Judgment reserved.

Vinodh Coomaraswamy J:

Introduction

Three consolidated actions

1 In these three consolidated actions, five plaintiffs seek equitable compensation against two

defendants for breaches of fiduciary duties. [note: 1] All seven parties – the five plaintiffs and bothdefendants – are subsidiary proprietors of flats in a condominium known as Horizon Towers. Bothdefendants were members of the sale committee in charge of the collective sale. The plaintiffs’ claimsarise from the ill-fated collective sale of Horizon Towers.

2 All five plaintiffs resisted fiercely the proceedings which would have forced them to sell theirhomes against their will. They did so twice before the Strata Titles Board (“STB”) and twice beforethe High Court. There was much satellite litigation also. The plaintiffs incurred substantial legal costsas a result.

3 The STB and the High Court sanctioned the collective sale over the plaintiffs’ objections. Threeof the five plaintiffs pursued their objections to the Court of Appeal. The appeal thoroughly vindicatedthe plaintiffs. The Court of Appeal upheld virtually the entirety of the plaintiffs’ suite of objections,both on the facts and on the law. The Court of Appeal set aside the collective sale. The plaintiffskept their homes.

4 All five plaintiffs – including the two who did not appeal – asked the Court of Appeal for anaward of costs. The Court of Appeal made certain costs orders in the plaintiffs’ favour, acceptingsome, but not all, of their submissions on costs. That left a margin between what the plaintiffs

recovered under the costs orders and what they actually paid to their own solicitors.

5 The plaintiffs in these proceedings seek equitable compensation equivalent to their unrecoveredcosts.

Plaintiff’s case

6 The plaintiffs’ case is that the defendants are obliged to compensate them in equity for theseunrecovered costs because the two defendants were members of the sale committee which initiatedthe collective sale of Horizon Towers and: (1) owed them fiduciary duties in their conduct of thecollective sale; (2) breached those fiduciary duties; (3) caused the plaintiffs to resist the collectivesale and to participate in the associated satellite litigation; and (4) thereby caused loss to theplaintiffs being their unrecovered costs.

7 To establish the fiduciary duties and to establish the breach of those duties, the plaintiffs relyon the Court of Appeal’s comprehensive judgment setting aside the collective sale in Ng Eng Ghee andOthers v Mamata Kapildev Dave and Others (Horizon Partners Pte Ltd, intervener) and AnotherAppeal [2009] 3 SLR(R) 109 (“Ng Eng Ghee (CA)”). They do so in two senses. First, they rely on it asa matter of stare decisis: as precedent binding on me that members of a sale committee in acollective sale owe all subsidiary proprietors certain fiduciary duties. Second, the plaintiffs rely on NgEng Ghee (CA) under the extended doctrine of res judicata giving rise to an abuse of process: that NgEng Ghee (CA) – which considered precisely the same conduct by precisely the same defendants(amongst others) in precisely the same collective sale – precludes those defendants from denyingthat they owed fiduciary duties to the plaintiffs and from denying that they breached those fiduciaryduties. Any attempt by the defendants to do so, the plaintiffs say, would amount to a collateralattack on the Court of Appeal’s decision in Ng Eng Ghee (CA) and is therefore illegitimate andimpermissible.

8 The plaintiffs’ case, therefore, is that the only issue for me to determine in these proceedings isthe quantum of the equitable compensation which the defendants should pay to the plaintiffs and notthe liability of the defendants to pay that compensation.

Defendants’ case

9 The defendants accept, at this stage of these proceedings, that I am bound as a matter ofstare decisis by Ng Eng Ghee (CA) to hold that, as members of a sale committee overseeing acollective sale, the defendants owed the plaintiffs certain fiduciary duties. They do, however, reservethe right to challenge the existence of these fiduciary duties if this matter goes further. But thedefendants submit that Ng Eng Ghee (CA) does not preclude them from seeking to prove to me thatthe defendants did not in fact breach those fiduciary duties. The defendants therefore assert in thisaction that they did in fact act in good faith throughout the collective sale process. They assert alsothat they would have been able to prove this in the collective sale proceedings if only they had beenafforded the opportunity to give evidence.

10 The defendants’ alternative case is that the plaintiffs’ action is itself barred by the doctrine ofres judicata, by the doctrine of issue estoppel or as an abuse of process because the court whichdetermined each stage of the collective sale proceedings, including the satellite litigation, heard fromthe plaintiffs as to the appropriate order for the costs of that stage and awarded or withheld costs aseach court thought appropriate. This culminated in the Court of Appeal’s reasoned decision on costsi n Ng Eng Ghee and Others v Mamata Kapildev Dave and Others (Horizon Partners Pte Ltd,intervener) [2009] 4 SLR(R) 155 (“Ng Eng Ghee (Costs)”).

Parties

11 The plaintiffs in Suit No 1084 of 2009 (“S1084”) are Mr Then Khek Koon and his wife Ms JasmineTan Kim Lian. They are the joint owners of a flat in Horizon Towers. Ms Tan gave evidence before me.Mr Then did not. Together, they incurred costs of $291,850.92 in the course of the collective saleproceedings from 2007 to 2009. They recovered $118,341.30 under the costs orders made in thoseproceedings. Their claim against the defendants in these proceedings is therefore for the difference:

$173,509.62. [note: 2]

12 The plaintiffs in Suit No 1085 of 2009 (“S1085”) are Mr Rudy Darmawan and his wife, Ms WidiaSeteono. They are the joint owners of a flat in Horizon Towers. Mr Darmawan gave evidence beforeme. Ms Seteono did not. Together, they incurred costs of $414,403.31 in the course of the collectivesale proceedings. They also incurred interest of $109,699.94 on an overdraft facility used to finance

their costs. [note: 3] The two sums together total $524,103.25. They recovered $186,028.84 underthe costs orders made in the collective sale proceedings. Their claim against the defendants in these

proceedings is therefore for the difference: $338,074.41. [note: 4]

13 The plaintiff in Suit No 1086 of 2009 (“S1086”) is Ms Maryani Sadeli. She is the sole owner of aflat in Horizon Towers. She is Mr Darmawan’s aunt. She associated herself entirely with MrDarmawan’s position during the collective sale proceedings and in the action before me. She did notgive evidence before me. She relies on Mr Darmawan’s affidavit of evidence in chief and his cross-examination to support her claim. By an oral agreement in October 2007, Mr Darmawan agreed to pay

Ms Sadeli’s past and future costs of the collective sale proceedings. [note: 5] She was billed costs of$123,785.98 in the course of the collective sale proceedings. She recovered $50,000 under the costsorders made in those proceedings. Her claim against the defendants in these proceedings is therefore

for the difference: $73,785.98. [note: 6]

The collective sale proceedings

First SC is constituted

14 The detailed background to the collective sale of Horizon Towers is set out in full in Ng EngGhee (CA) at [6] to [74]. I will endeavour to summarise it here to the extent that it is relevant for mydecision on the matters before me.

15 In October 2005, the first defendant was the chairman of the Management Committee ofHorizon Towers. It was at that time that the idea of a collective sale of Horizon Towers was firstmooted, though not by either defendant. The first defendant was attracted by the idea and wasinvolved in the informal preparatory work for a potential collective sale. Starting in February 2006,First Tree Properties Ltd (“First Tree”), a property broker, made a series of presentations toincreasingly-large groups of subsidiary proprietors on the feasibility of a potential collective sale. FirstTree ultimately proposed a reserve price of $500m. At that price, each subsidiary proprietor stood togain 80% more for his flat by a collective sale than by an individual sale. This margin is known as thecollective sale premium.

16 On 21 March 2006, the second defendant took an option to purchase an additional flat in

Horizon Towers at $1.2m. He exercised the option on 3 April 2006. [note: 7] He and his wife completedthe purchase and became co-owners of the flat on 26 June 2006. Separately, on 24 March 2006, thefirst defendant took an option to purchase an additional flat in Horizon Towers at $1.35m. He

exercised the option on 7 April 2006. He and his daughter completed the purchase and became co-owners of the flat on 16 June 2006. Each defendant financed his purchase with bank borrowings.

17 On 23 April 2006, the subsidiary proprietors of Horizon Towers held an Extraordinary GeneralMeeting (“EGM”) to launch the collective sale process. The first defendant chaired the EGM. Thesecond defendant was present at the EGM and played an active role in it. Neither defendant disclosedto all the subsidiary proprietors that he had purchased an additional flat in Horizon Towers. First Treeand Drew & Napier LLC (“D&N”) made presentations to the subsidiary proprietors. Following the EGM,nine subsidiary proprietors formed a sale committee (“the First SC”) to carry out a collective sale ofHorizon Towers. The first defendant and the second defendant were among these nine. The firstdefendant was elected the Chairman of the First SC. On 26 April 2006, the First SC formally appointedFirst Tree as the sole marketing agent for the collective sale. The First SC also formally appointedD&N as its legal adviser for the collective sale.

18 In due course, a Collective Sale Agreement (“CSA”) dated 11 May 2006 was presented to thesubsidiary proprietors for accession. On 6 July 2006, the press reported that if the collective salewent ahead, the $500m demanded for Horizon Towers would smash the existing collective sale pricerecords. By 20 July 2006, subsidiary proprietors representing 80.65% of the share value of HorizonTowers had signed the CSA. The defendants still did not disclose to all the subsidiary proprietors thateach of them had purchased an additional flat in Horizon Towers, whether in the CSA itself, when theCSA was circulated or while it remained open for accession.

19 The plaintiffs did not sign the CSA.

20 First Tree launched the public tender for Horizon Towers in July 2006. The tender closed inAugust 2006 with no bids. First Tree then solicited buyers by private treaty. In December 2006, FirstTree learned from Hotel Properties Limited (“HPL”) that it was interested in purchasing HorizonTowers. On 3 January 2007, Vineyard Holdings (H.K.) Ltd (“Vineyard”) offered $510m for HorizonTowers. This offer was circulated to all members of the First SC. On 4 January 2007, at HPL’s request,a meeting took place between a representative of HPL and some of the members of the First SCincluding the first defendant. HPL indicated orally an interest in purchasing Horizon Towers at a priceof $500m. HPL wanted to place a deposit of $5m with First SC and then take up to 30 days toconsider whether to proceed with the purchase. HPL proposed that if it decided not to purchaseHorizon Towers within those 30 days, the subsidiary proprietors would have to return the $5m butcould keep the interest earned on it. The First SC rejected HPL’s proposal but invited HPL to comeback with improved terms.

21 On the same day, one of the members of the First SC, Mr Henry Lim, informed Vineyard of HPL’sinterest and suggested that Vineyard make a deposit of $50m as proof of its intent. Mr Henry Limtestified in later proceedings (see [50] below) that he received no response from Vineyard despitemaking efforts to contact Vineyard up until 16 January 2007.

22 On 6 January 2007, the First SC convened a meeting to consider the offers they had by thenreceived and to discuss whether the reserve price should be raised above $500m due to the risingproperty market. A member of the First SC, Mr Bharat Mandloi, felt very strongly that the subsidiaryproprietors should be consulted before accepting any offer. He gave two reasons. Both reasons wererelated to the rapidly-rising property market at the end of 2006 and into 2007. His two reasons werethat a collective sale in January 2007 at a reserve price which had been fixed many months earliermeant that: (a) the collective sale premium had almost entirely disappeared as at January 2007; and(b) each subsidiary proprietor would no longer receive sufficient funds to buy an equivalent propertyas a replacement and leave surplus cash. The First SC decided not to seek a fresh mandate from the

consenting subsidiary proprietors. The first defendant said that if they did that, they were unlikely toget that mandate and the collective sale would come to an end. The remaining eight members of theFirst SC, including both defendants, therefore voted in favour of negotiating with HPL with a view to asale to HPL. Although Mr Mandloi was recorded as having abstained, in fact he abruptly walked out ofthe meeting.

23 On 8 January 2007, First Tree invited HPL to make a formal offer. On 12 January 2007, thesecond defendant emailed the first defendant and the other members of the First SC. He said thatalthough he had voted with the majority at the meeting on 6 January 2007, he did so to maintainunanimity and in light of the legal advice received. He said, further, that two points were continuingto cause him concern: (a) the terms of HPL’s offer meant it could back out with little loss; and (b)the reserve price of $500m was too low in light of the changed market conditions. He thereforesuggested that the First SC should protect itself by doing three things: (a) getting legal advice inwriting that the First SC was entitled to accept HPL’s offer as it met the reserve price and that theFirst SC would be exposed to claims if it did not accept HPL’s offer and no better offer came along;(b) getting First Tree’s opinion that HPL’s offer was the best so far and the First SC should accept it;and (c) writing to all parties who had expressed earlier interest to note that none of them hadfollowed through with a firm bid.

24 On 14 January 2007, as a result of an exchange of emails with D&N, the second defendantemailed D&N to say that he was changing his “yes” vote at the meeting on 6 January 2007 to anabstention. No other member of the First SC changed his vote.

25 On 15 January 2007, an HPL group company made an offer to purchase Horizon Towers at$500m. On 22 January 2007, the First SC issued an option to HPL’s special purpose vehicle, HorizonPartners Pte Ltd (“HPPL”) to purchase Horizon Towers en bloc (“the Option”) at a price of $500m.HPPL exercised the Option on 12 February 2007. On that date, therefore, the Option became abinding agreement (“the S&P”) for the sale of Horizon Towers to – and for the purchase of HorizonTowers by – HPPL, subject to its terms. One of the terms of the S&P was an express conditionprecedent that the STB approve the collective sale under s 84A of the Land Titles (Strata) Act (Cap158, 1999 Rev Ed) (“the Act”).

26 The S&P imposed an obligation on the consenting subsidiary proprietors to apply for the STB’sapproval expeditiously. But it imposed no obligation on the consenting subsidiary proprietors to obtainthe STB’s consent, presumably because that was a matter not within their control, or at least notentirely within their control. Instead, the S&P provided simply that if the condition precedent was notfulfilled within six months from the date of the S&P – that is, on or before 11 August 2007 – theconsenting subsidiary proprietors had the right, but not the obligation, to extend the deadline for upto another four months. The result was that if the consenting subsidiary proprietors applied to theSTB expeditiously but the STB did not grant its approval, the S&P would lapse with no liability indamages on the part of the consenting subsidiary proprietors.

27 A general meeting of the subsidiary proprietors of Horizon Towers was held on 25 March 2007 toconsider the collective sale. Lawyers from D&N attended the meeting to explain the terms andconditions of the CSA and the Option and to explain the collective sale procedure. As at the date ofthis meeting, subsidiary proprietors representing 82.98% of the total share value in Horizon Towershad signed the CSA. But many consenting subsidiary proprietors were unhappy about the S&P. Theirconcerns included the First SC’s failure to: (1) keep the consenting subsidiary proprietors informed;(2) to obtain a proper valuation before granting the Option and (3) to seek a fresh mandate to sell atthe original reserve price despite the changed market conditions.

28 At the time of the S&P in January 2007 the $500m which HPPL agreed to pay for HorizonTowers was the highest price ever paid in a collective sale in Singapore. But by March 2007, thesteadily-rising property market meant that the consenting subsidiary proprietors would be no betteroff selling their flats through a collective sale than they would if they were to sell them individually.As time went on after March 2007, the price agreed with HPPL became more and more unfavourableto the consenting subsidiary proprietors. The property market continued its surge and the record setby Horizon Towers in January 2007 was broken just six months later by the collective sale of aneighbouring and comparable property.

29 The consenting subsidiary proprietors were stuck with a bad bargain. What was worse, thatbargain had been made for them by someone else: the First SC. The S&P bound them to sell theirflats to HPPL at a price which was below what they could otherwise achieve. But if they refused tosell their flats to HPPL, they would find themselves liable to pay substantial damages. The only wayfor them to escape the bad bargain without any liability was to ensure that they applied expeditiouslyfor the collective sale order and to hope that the STB did not order the collective sale, or at least,not on or before the deadline of 11 August 2007.

Consenting subsidiary proprietors file application to STB

30 It was against this background that three members of the First SC, acting on behalf of allconsenting subsidiary proprietors, filed an application to the STB on 13 April 2007 by way of STB 43 of2007 (“STB43”) to order the collective sale of Horizon Towers (“the Collective Sale Application”). Thefirst defendant was one of the applicants. The STB’s order, if granted on or before 11 August 2007,would compel the objecting subsidiary proprietors – including the plaintiffs – to sell their flats againsttheir will. But it would also force the consenting subsidiary proprietors to sell their flats at a pricewhich no longer met their expectations.

31 Tan Kok Quan Partnership (“TKQP”) represented all five plaintiffs in opposing the Collective SaleApplication. Harry Elias Partnership (“HEP”) represented another group of subsidiary proprietors whowere also opposed to the Collective Sale Application, but on different grounds.

32 The five plaintiffs filed substantial written objections in the Collective Sale Application on 4 May2007. To succeed in opposing the Collective Sale Application, they had to establish that thetransaction was not one in good faith within the meaning of section 84A of the Act. They alleged thatthis test was satisfied because:

(a) The price for the collective sale was too low and did not represent the true market valueof Horizon Towers;

(b) The First SC had inadequate justification or analysis to accept First Tree’s reserve price of$500m at the time it was set or at the time the First SC granted the option to HPPL, particularlyin light of the rising property market;

(c) The First SC failed to obtain a proper valuation before granting an option to purchase toHPPL;

(d) The First SC should either have conducted a second tender exercise to take account ofimproved market sentiment since the first tender exercise failed to attract any bids or shouldhave sought a fresh mandate from the subsidiary proprietors given First Tree’s inability to securea purchaser above the reserve price;

(e) The First SC granted an option to HPPL to buy Horizon Towers at $500m even though thebasis on which the consenting subsidiary proprietors had given their mandate at that price – theopportunity to realise a collective sale premium sufficient to allow purchase of an equivalentreplacement residence and leave a surplus – no longer held true in January 2007.

(f) The First SC failed to consult the subsidiary proprietors before granting an option at areserve price which the First SC knew or ought to have known was too low.

(g) The First SC rushed the collective sale and should instead have consulted subsidiaryproprietors on the method of sale and the reserve price.

(h) Certain members of the First SC or their families had purchased additional flats in HorizonTowers and did not disclose this fact to all subsidiary proprietors. This put those members of theFirst SC in a position of potential conflict of interest as their interest in obtaining the highestprice for the collective sale might have been outweighed by their interest in achieving a quicksale.

(i) The First SC appointed First Tree as the exclusive property broker for the collective sale ofHorizon Towers, apparently without properly evaluating its credentials. The First SC then reliedexclusively on First Tree for information on the value of Horizon Towers and the state of themarket. First Tree was in a position of apparent conflict of interest when it recommended thatthe First SC sell to HPPL at $500m because this came just a few days before First Tree’sexclusivity came to an end.

33 I have set out at length these points which the plaintiffs made to the STB on 4 May 2007 – atthe very outset of the protracted collective sale proceedings – because these were the very pointswhich ultimately won the day in the Court of Appeal almost 2 years later in April 2009 (see [75]below). I draw specific attention to the plaintiffs’ point at [32(h)] above. I do so for two reasons.First, this is the only one of the plaintiffs’ nine points which is clearly associated with a fiduciary duty:in this case, a fiduciary’s core duty of loyalty. All the remaining points are framed in the language of abreach of a duty to exercise care and skill, which could equally be a tortious duty at common law or afiduciary duty in equity. Second, the plaintiffs framed this point in the language of a potential conflict,not an actual conflict. This, it will be seen, was also the basis on which the Court of Appeal in Ng EngGhee (CA) approached the issue.

First SC resigns, save for the second defendant

34 By June 2007, the consenting subsidiary proprietors’ unhappiness over the S&P was mounting.Anonymous letters circulated at Horizon Towers called for the consenting subsidiary proprietors towithdraw from the CSA and to remove the members of the First SC from office. As a result, the firstdefendant resigned from the First SC and Ms Doreen Siow (“Ms Siow”) became a sale committeemember. Although this was in law simply a change in the persons constituting the First SC rather thanthe dissolution of the First SC and the reconstitution of a new SC, I will call this the “Second SC”.The second defendant and Mr Henry Lim did not resign and continued to serve on the Second SC.

STB sets a compressed timeline

35 In light of the deadline under the S&P to satisfy the condition precedent (see [25] above), theSTB held a procedural hearing on 4 July 2007 to decide whether to set a compressed proceduraltimeline to ensure that the Collective Sale Application could be heard and determined on or before 11August 2007. The plaintiffs, not surprisingly, objected to a compressed timeline. Their stated ground

was that it did not allow them enough time to prepare properly their case in opposition to theCollective Sale Application. The consenting subsidiary proprietors, not surprisingly (see [29] above),took a neutral position. They left it to the STB to decide whether to fix the hearing before or after 12August 2007 and declined to commit themselves as to whether they would or would not agree toextend the deadline under the S&P if the hearing took place after on or after 12 August 2007. HPPLwas the only party whose interests would be prejudiced without a compressed timeline. Notsurprisingly, it was the only party who submitted positively that the timeline should be compressed.The STB agreed. It gave directions for an expedited hearing to ensure that the Collective SaleApplication could be heard and determined on or before 11 August 2007.

Plaintiffs apply for judicial review

36 All five plaintiffs applied on 12 July 2007 by way of Originating Summons No 1057 of 2007(“OS1057”) for leave to seek judicial review of the STB’s decision to expedite the hearing of theCollective Sale Application. TKQP represented the plaintiffs in their application. If their application hadbeen allowed, the timing was such that it would have been practically impossible to satisfy thecondition precedent by obtaining the STB’s consent on or before 11 August 2007. That result wouldbenefit all the subsidiary proprietors – both objecting and consenting – by bringing the S&P to an endwithout any liability.

37 The consenting subsidiary proprietors were not parties to OS1057. They could not support theplaintiffs’ application without breaching their obligation under the S&P to pursue the Collective SaleApplication expeditiously. So they did not seek to be heard on OS1057 at all. It was only HPPL whohad a real interest in opposing this application. It therefore applied successfully to intervene inOS1057. On 19 July 2007 and 20 July 2007, Tan Lee Meng J heard submissions from the plaintiffs andfrom HPPL on OS1057. He dismissed the plaintiffs’ application. He made no order as to costs.

38 Part of the plaintiffs’ claim in these proceedings is to recover equitable compensation from thedefendants for the costs the plaintiffs incurred in bringing OS1057 and which costs Tan J denied thementirely.

STB dismisses the Collective Sale Application

39 The STB heard the Collective Sale Application over 6 days between 17 July 2007 and 3 August2007. On 3 August 2007, part-way through the evidential phase, the STB dismissed the CollectiveSale Application (“the 1st STB decision”): see Doreen Siow and Others v Lo Pui Sang/Kuah Kim Chooand Others [2007] SGSTB 3. It did so expressly and solely on the basis of a technical defect and noton the merits of the Collective Sale Application. The STB declined to award the costs of theCollective Sale Application to the objecting subsidiary proprietors because it had dismissed theCollective Sale Application on a ground which none of the objecting subsidiary proprietors had raised(at [25]).

40 Part of the plaintiffs’ claim in these proceedings is to recover equitable compensation from thedefendants for the costs which the plaintiffs incurred in participating in this first tranche of STB43and which the STB declined to award them entirely.

Condition precedent is not satisfied and the S&P lapses

41 On 11 August 2007, the six-month deadline for the consenting subsidiary proprietors to securethe STB’s approval of the collective sale expired. No approval had been obtained. As was their right,the consenting subsidiary proprietors chose not to extend the deadline for obtaining the STB’s

approval.

42 The Second SC took the view that this meant that the collective sale had come to an end infailure. It disbanded. Everyone at Horizon Towers was happy. The plaintiffs were happy: their fight tosave their homes had succeeded. The consenting subsidiary proprietors were happy: they had beenrelieved of any obligation to sell their flats to HPPL at a price which no longer met their expectationswithout breaching their contract with HPPL.

HPL sues the consenting subsidiary proprietors for $1bn

43 HPPL, of course, was unhappy: they had lost an opportunity to buy Horizon Towers at $500m.That was a price which was becoming a better and better price – from their perspective as buyers –as the property market continued its surge upwards during 2007.

44 On 23 August 2007, HPPL commenced legal proceedings by way of Originating Summons No1238 of 2007 (“OS1238”). In it, HPPL alleged that the consenting subsidiary proprietors had breachedthe S&P by failing to do everything in their power to obtain a collective sale order from the STB. HPPLclaimed $1bn against the consenting subsidiary proprietors collectively as damages for this breach.

High Court sets aside the STB’s decision

45 HPPL’s action in OS1238 had its desired effect. On 30 August 2007, the consenting subsidiaryproprietors appealed to the High Court by way of Originating Summons No 1269 of 2007 (“OS1269”)seeking to reverse the entirety of the 1st STB decision. They filed this appeal without exercising theirright to extend the 11 August 2007 deadline under the S&P. Presumably, therefore, the consentingsubsidiary proprietors continued to take the position that the S&P had lapsed while reserving tothemselves the right to exercise their option at some later date to extend the deadline for fulfilmentof the condition precedent.

46 Also on 30 August 2007, all five plaintiffs collectively applied to the High Court to reverse theSTB's decision not to award them the costs of the first tranche of the Collective Sale Application andfor an order that those costs be paid by the consenting subsidiary proprietors. Their application wasby way of Originating Summons No 1270 of 2007 ("OS1270").

47 On or about 7 September 2007, a new Sale Committee (“Third SC”) was constituted with oneMr Lim Seng Hoo as its chairman. The second defendant did not stay on to serve as a member of theThird SC. The Third SC granted HPPL the extension of the S&P that it wanted.

48 HPPL applied to intervene in OS1269 on 20 September 2007. On 26 September 2007, a group of13 subsidiary proprietors (which included the first defendant) also filed an application to intervene inOS1269. The plaintiffs opposed both applications to intervene. Choo Han Teck J heard theapplications to intervene. He allowed these applications on 28 September 2007. He reserved the costsof these applications.

49 On 1, 2 and 3 October 2007, Choo J heard the substantive application in OS1269. Hedetermined it on 11 October 2007. He set aside the 1st STB decision and remitted the Collective SaleApplication to the STB for a determination on the merits. He reserved the issue of the costs ofOS1269 to a later date. Part of the plaintiffs’ claim in these proceedings is to recover equitablecompensation from the defendants for the costs which the plaintiffs incurred in connection withOS1269, including the costs of unsuccessfully opposing HPPL’s application to intervene, all of whichcosts Choo J reserved.

STB allows the Collective Sale Application

50 The Collective Sale Application therefore returned to the STB for a second tranche of hearingsin STB43. The hearing in this second tranche took place over 12 days between 16 October and 15November 2007. The Third SC offered three members of the First SC as witnesses during this hearing.The defendants were not amongst these three witnesses. The defendants did not take any steps tooffer themselves for cross-examination. The plaintiffs did not seek to compel either defendant totestify by subpoena.

51 On 25 October 2007, the group of objecting subsidiary proprietors represented by HEP (that is,the group not including the plaintiffs (see [31] above) applied to the STB for a subpoena to compelthe first defendant to testify. Nobody attempted to subpoena the second defendant. The STBrejected the application on the basis that the applicants had failed to provide sufficient particulars ofthe first defendant’s proposed testimony. This was a significant procedural decision. The Court ofAppeal later found in Ng Eng Ghee (CA) (at [56]) that by this decision, the STB had deprived itself ofkey information.

52 The parties filed closing submissions in the Collective Sale Application on 23 November 2007.They filed reply submissions on 30 November 2007. On 7 December 2007, the STB granted the orderfor the collective sale of Horizon Towers: see Mamata Kapildev Dave and Others v Lo Pui Sang/KuahKim Choo and Others [2008] SGSTB 7 (“Ng Eng Ghee (STB)” ) . Exceptionally, even though theplaintiffs had lost Ng Eng Ghee (STB), the STB did not order them to pay costs. In Ng Eng Ghee (CA),the Court of Appeal reversed the substantive decision in Ng Eng Ghee (STB). In Ng Eng Ghee (Costs),the Court of Appeal made costs orders in favour of the five plaintiffs for their costs of this secondtranche of STB43.

53 Part of the plaintiffs’ claim in these proceedings is to recover equitable compensation from thedefendants for the difference between the actual costs which the plaintiffs incurred in connectionwith this second tranche of STB43 and the costs they recovered for it under Ng Eng Ghee (Costs).

Plaintiffs appeal to the High Court and lose

54 On 4 January 2008, all five plaintiffs (together with another objecting subsidiary proprietor)applied to the High Court to set aside Ng Eng Ghee (STB). They did so by way of Originating SummonsNo 11 of 2008 (“OS11”). Also on 4 January 2008, the group of objecting subsidiary proprietorsrepresented by HEP filed a similar but separate appeal. Their appeal was by way of OriginatingSummons No 10 of 2008 (“OS10”). A day earlier, a third group of three objecting subsidiary proprietorsled by one Mr Lo Pui Sang filed their own application to set aside Ng Eng Ghee (STB). Their appealwas by way of Originating Summons No 5 of 2008 (“OS5”). However, Mr Lo and one of his two co-plaintiffs in OS5 discontinued their application before it could be determined, leaving the third co-plaintiff to go it alone.

55 Choo J heard OS5, OS10 and OS11 on 19 March 2008, 20 March 2008 and 30 April 2008.Although the plaintiffs were represented at the outset of OS11, they soon discharged their solicitorsand acted thereafter in person. Mr Darmawan appeared in person and on behalf of Ms Seteono and MsSadeli. Ms Tan appeared in person and on behalf of Mr Then. Both Mr Darmawan and Ms Tan putforward substantial principal and reply written and oral submissions in OS11. It is no false complimentto say that, despite the odds being stacked against them, they presented their case ably to Choo Jboth on the facts and on the law.

56 On 17 July 2008, Choo J upheld Ng Eng Ghee (STB) and dismissed OS5, OS10 and OS11. He

commented, in the course of his judgment, that if the First SC had deliberately or negligently failed toconsider the Vineyard offer (see [20] above), the objecting subsidiary proprietors’ recourse againstthe First SC was by way of separate litigation and not by attempting to set aside Ng Eng Ghee (STB)(see Lo Pui Sang and others v Mamata Kapildev Dave and others (Horizon Partners Pte Ltd,intervener) and other appeals [2008] 4 SLR(R) 754 (“Ng Eng Ghee (HC)”) at [17]). Choo J invitedfurther submissions on costs but it appears that none were made. In any event, the Court of Appealin Ng Eng Ghee (Costs) subsequently awarded the costs of OS11 to the plaintiffs.

57 Part of the plaintiffs’ claim in these proceedings is to recover equitable compensation from thedefendants for the difference between the actual costs which the plaintiffs incurred in connectionwith OS11 and the costs they recovered for OS11 under Ng Eng Ghee (Costs).

Plaintiffs appeal to the Court of Appeal and win

58 On 15 August 2008, Mr Darmawan, his wife and Ms Sadeli appealed to the Court of Appealagainst Choo J’s decision in Ng Eng Ghee (HC). They did so by way of Civil Appeal No 120 of 2008(“CA120”). They filed their notice of appeal through HEP but acted in person thereafter through MrDarmawan for virtually all of CA120. Mr Then and Ms Tan did not appeal against Choo J’s decision. Onthe same day, 15 August 2008, the objecting subsidiary proprietors represented by HEP also filed anappeal to the Court of Appeal by way of Civil Appeal No 119 of 2008 (“CA119”).

59 The Court of Appeal heard CA120 and CA119 together on 3 February 2009. Mr Darmawanargued the appeal as a litigant in person and also on behalf of his wife and Ms Sadeli. Again, despitethe odds being stacked against him, he presented his case ably on the facts and the law.

60 On 2 April 2009, the Court of Appeal delivered its judgment in Ng Eng Ghee (CA). It allowed theappeals. The Court of Appeal accepted virtually all of Mr Darmawan’s arguments (see [32] above).The Court of Appeal’s decision saved the plaintiffs’ homes from compulsory sale.

Court of Appeal gives the plaintiffs costs

61 Following its decision in Ng Eng Ghee (CA), the Court of Appeal received and consideredsubmissions on costs from the parties to CA119 and CA120 and from Mr Lo, Mr Then and Ms Tan asnon-parties. I go into this in more detail at [259] to [265] below. On 7 July 2009, the Court of Appealdelivered its judgment in Ng Eng Ghee (Costs) and made certain costs orders, which I havesummarised at [267] below.

The issues raised in these proceedings

Plaintiffs’ case

62 The costs orders in Ng Eng Ghee (Costs) left the plaintiffs out of pocket. I have summarised at[11] to [13] above the precise extent of the shortfall. Table 1 at the end of this judgment shows howthe plaintiffs arrived at these sums. I have left out of Table 1 – because it raises different issues – MrDarmawan’s claim of $109,699.94 for overdraft interest.

[LawNet Admin Note: Table 1 is viewable only to LawNet subscribers via the PDF in the Case ViewTools.]

63 The plaintiffs collectively rely on the holdings of law and findings of fact in Ng Eng Ghee (CA) toclaim this sum from the defendants as equitable compensation for breach of fiduciary duties.

First defendant’s case

64 The first defendant says that he is not liable to pay equitable compensation to the plaintiffs forthe following reasons:

(a) As a member of the First SC, he did not owe any fiduciary duties to the subsidiaryproprietors of Horizon Towers, including the plaintiffs.

(b) Even if he did, he did not breach those fiduciary duties in the collective sale of HorizonTowers because:

(i) His purchase of an additional flat in Horizon Towers was not a conflict of interestwhich could be a breach of fiduciary duties;

(ii) Even if it was, the first defendant made an effort to disclose the potential conflict toD&N and was not advised that he needed to disclose this purchase to the other subsidiaryproprietors;

(c) The finding in Ng Eng Ghee (CA) that the first defendant breached his fiduciary duties wasarrived at in breach of natural justice because the first defendant did not have an opportunity tobe heard before those findings were made;

(d) In any event, the plaintiffs are precluded from bringing these claims as their entitlement tocosts has been disposed of as a by-product of the collective sale proceedings and, in particular,in Ng Eng Ghee (Costs). The first defendant therefore asserts that the plaintiffs’ claims in theactions before me are barred by res judicata or as an abuse of process.

Second defendant’s case

65 The second defendant’s defence focuses on the lack of causation and failure to prove loss. Hecontends that:

(a) The second defendant did not breach his fiduciary duties. He disclosed his purchase of anadditional unit to D&N and was not advised that he needed to disclose this to all subsidiaryproprietors. He also changed his vote to one of abstention when the First SC voted on the saleto HPPL;

(b) The plaintiffs’ loss was not caused by the second defendant’s alleged breaches of fiduciaryduties. The responsibility for the final sale to HPPL lay in the hands of the Third SC. It was theThird SC which granted an extension of the S&P to HPPL when there was no obligation to do so.After the 1st STB decision, the 11 August 2007 deadline passed without extension and it wasagreed that the collective sale was at an end. The Third SC succumbed to pressure from HPPLand revived the collective sale. The second defendant contends that this broke the chain ofcausation between the second defendant’s alleged breach and the plaintiffs’ loss.

(c) In the alternative, the plaintiffs’ losses are too remote to be recovered.

(d) In the alternative, the quantum of loss and damage claimed is manifestly excessive orunreasonable or includes items which were unreasonably incurred.

(e) In any event, the second defendant argues that the plaintiffs are barred by the doctrine

of res judicata from making any claims for costs over and above those awarded in the collectivesale proceedings and, in particular, in Ng Eng Ghee (Costs).

Four issues to be decided

66 I therefore have to determine the following four issues:

(a) Did the defendants owe the plaintiffs fiduciary duties?

(b) If so, did the defendants’ breach their fiduciary duties to the plaintiffs?

(c) If so, did the defendants’ breach of their fiduciary duties cause loss to the plaintiffs?

(d) If so, can the plaintiffs recover equitable compensation for their unrecovered legal costs?

First issue: did the defendants owe the plaintiffs fiduciary duties?

Interpretation of section 84A before Ng Eng Ghee (CA)

67 The plaintiffs based their objection to the Collective Sale Application on s 84A(9)(a)(i)(A) of theAct. At the time the Collective Sale Application was filed, that material parts of that provision stoodas follows:

(9) The Board shall not approve an application… (a) if the Board is satisfied that… (i) thetransaction is not in good faith after taking into account… (A) the sale price for the lots and thecommon property in the strata title plan . . . .

68 Until Ng Eng Ghee (CA), s 84A(9)(a)(i)(A) of the Act was understood and applied as follows:

(a) The legislature’s underlying intention in enacting these provisions “was to facilitate – andnot to place unnecessary obstacles in the way of – collective sales”: see Ng Swee Lang andanother v Sassoon Samuel Bernard and others [2008] 2 SLR(R) 597 at [8]; Tsai Jean v Har MeeLee and others [2009] 2 SLR(R) 1 (“Tsai Jean”) at [21].

(b) There was a core meaning to the expression “good faith” as used in this section whichinvolves “honesty or the absence of bad faith”: see Dynamic Investments Pte Ltd v Lee CheeKian Silas and others [2008] 1 SLR(R) 729 at [18]. Therefore an objecting subsidiary proprietorcould not resist a collective sale application unless he could show outright dishonesty or thepresence of bad faith in the transaction, and not merely egregious recklessness whichapproached but did not constitute intent. “To construe good faith in any other manner wouldtend to undermine the legislative intent as it would lower the threshold for objectors to cross”:Tsai Jean at [21]. This was also how the STB understood the concept of good faith in thisprovision in Ng Eng Ghee (STB). It found that “good faith” within the meaning of s 84A(9)(a)(i) ofthe LTSA simply meant “honesty, fairness and absence of unconscionable and perhaps evenreckless behaviour” (at [60]).

(c) The STB and the High Court specifically rejected any suggestion that a sale committeeowed to the subsidiary proprietors the same duty to act in good faith and to take reasonablecare to obtain the true market value of the property which a mortgagee owes a mortgagor whenexercising its power of sale: see Tsai Jean at [22]; Ng Eng Ghee (STB) at [58]; cf ThevasanGnanasundram & Others v Khaw Seng Ghee & Another [2000] SGSTB 4. That duty is, of course,a less stringent duty than the duty which a trustee owes a beneficiary when exercising a power

of sale: see Beckkett Pte Ltd v Deutsche Bank AG and another and another appeal [2009] 3SLR(R) 452 at [27] and the cases cited there. The understanding of s 84A typified in Tsai Jean,therefore, impliedly excluded any scope for a sale committee to be bound by the more onerousduty of a trustee exercising a power of sale: cf. Ng Eng Ghee (CA) at [121].

(d) The High Court accepted that s 84A(9)(a)(i) of the Act is not so narrow as to require thecourt to focus only on the sale price in applying the section. Section 84A(9)(a)(i) was thereforeseen to permit the court to consider also an independent valuation of the property and, possibly,how the sale price had been arrived at: Tsai Jean at [24]. But the general approach of the HighCourt was that so long as the sale price was within an acceptable range from the market value ofthe development, the STB ought to approve the collective sale: Tsai Jean at [31]. Further, themarket value was to be determined at the time the development was sold: a sale did not lackgood faith for the sole reason that it became apparent later – for example, while the collectivesale application was pending but before it was finally determined – that the sale committee couldhave sold the development at a higher price if they had waited longer: Chang Mei Wah Selena andothers v Wiener Robert Lorenz and others and other matters [2008] 4 SLR(R) 385 at [33]; onappeal on other points sub nom Kok Chong Weng and others v Wiener Robert Lorenz and others(Ankerite Pte Ltd, intervener) [2009] 2 SLR(R) 709.

(e) The STB’s role was to determine whether the proposed sale was a bona fide and arm’slength transaction by considering the minority’s objections in light of the interests of all thesubsidiary proprietors and in light of the scheme and intent of the collective sale provisions of theAct, paying particular attention to: the sale price; the method of distributing the sale proceeds,ensuring that the minority owners are treated no less favourably than the majority; and therelationship of the purchaser to the owners to ensure that there is no collusion: see Ng Eng Ghee(STB) at [49].

69 The old thinking outlined above kept the concept of a “transaction... not in good faith” withinstrict bounds so as to avoid (i) too easily defeating the statutory majority’s will to sell; (ii) too easilydefeating the purchaser’s interest in his bargain with the statutory majority; and (iii) too easilydefeating the purpose of the Act. The Act envisages a collective sale process which results in acollective sale price and ultimately, with the approval of the STB, in an actual collective sale to thepurchaser. An objecting subsidiary proprietor is an unwilling seller. He therefore has a legitimateinterest in both the collective sale process (which he has refused to participate in) and the collectivesale price (at which his property will be monetised against his will). A consenting subsidiary proprietor,by contrast, is a willing seller and must be taken to be motivated by price. It was therefore thoughtthat the law would go too far to vindicate an objecting subsidiary proprietor’s interest in thecollective sale process if the court were to strike down a collective sale on grounds of defectiveprocess alone, when the collective sale price was within an acceptable range from the market valueof the development, assessed at the time of sale and without the benefit of hindsight. To reject thecollective sale in these circumstances, it was thought, would defeat the will of the consentingsubsidiary proprietors even though the price which resulted from the collective sale process provided,within an acceptable margin, a fair monetary exchange for the property rights of both the objectingand the consenting subsidiary proprietors. Cited in support of this approach was the scenario of theproperty market falling after the collective sale price was agreed: should the consenting subsidiaryproprietors be deprived of their bargained-for price simply because of defects in the collective saleprocess in circumstances where the objecting subsidiary proprietors would receive fair compensationfor their property rights? If the defective process had caused the objecting subsidiary proprietors anyloss, the thinking was, they retained such recourse as the substantive law permitted them againstthose responsible for the defective process and could pursue that recourse without depriving theconsenting subsidiary proprietors of their bargain (see Ng Eng Ghee (HC) at [17]).

70 So the key finding by the STB in the Collective Sale Application was that the sale price agreedby the First SC for Horizon Towers was within an acceptable range from the market value of HorizonTowers in January 2007, assessed at the time of hearing without the benefit of hindsight: see Ng EngGhee (STB) at [87], [103]. This finding was crucial on the old approach. Choo J upheld that approachand that finding on appeal to the High Court: Ng Eng Ghee (HC) at [16].

Interpretation of section 84A in Ng Eng Ghee (CA)

71 The Court of Appeal’s closely-reasoned textual, historical and policy-based analysis of s 84A ofthe Act in Ng Eng Ghee (CA) therefore came as an epiphany. It revealed that the STB, the High Courtand the profession had misunderstood the scope and operation of that section. Although the Court ofAppeal accepted that the legislative intent of s 84A was to facilitate collective sales, it also madeemphatically clear that the legislation did not decree that price is everything: process is equallyimportant, particularly for objecting subsidiary proprietors and not only in the narrow sense previouslyunderstood. It is significant that the Court of Appeal had evidence of the market value of HorizonTowers at the time the First SC granted the option to purchase to HPPL, examined that evidence (NgEng Ghee (CA) at [44]) but expressly declined to make a finding whether the sale price agreed by theFirst SC with HPPL was or was not within an acceptable range of the market value in January 2007.Instead, the Court of Appeal expressly rested its decision on its finding that the defects in theprocess had depressed the price, not on any finding that that depressed price was beyond anacceptable margin below the market value at the time of sale.

72 The Court of Appeal’s reasoning in Ng Eng Ghee (CA) proceeded as follows. A sale committee ina collective sale has the power to affect the legal relations of all the subsidiary proprietors with thirdparties. It is therefore an agent for the subsidiary proprietors. This gives rise to a fiduciaryrelationship between a sale committee and the subsidiary proprietors (at [108]). At the very outset ofthe collective sale process, before the statutory majority is achieved, there is no clear separationbetween those who consent to the collective sale and those who object. The sale committee istherefore an agent for all the subsidiary proprietors (at [104] and [108]). The content of its fiduciaryduty then is simply to obtain the requisite consent for the collective sale, to appoint competentprofessional advisers and to avoid any potential conflict of interest (at [107]). Once the statutorythreshold is reached and there is a clear separation between those who consent and those whoobject, a sale committee’s role becomes that of an impartial agent acting for both groups: an agentobliged to hold an even hand between them (at [107]). These fiduciary duties prohibit a salecommittee from acting against the interests of the subsidiary proprietors (at [110]). The content ofthe sale committee’s fiduciary duties to the consenting subsidiary proprietors is derived from thesubstantive law supplemented, to the extent that the law permits derogation, by the contractualprovisions of the collective sale agreement (at [116]). The objectors are not of course parties to orbound by the collective sale agreement (at [117]). So the content of the sale committee’s duties tothe objecting subsidiary proprietors arises under the substantive law alone. Because a sale committeealways represents the interests of all the subsidiary proprietors, its fiduciary duties are akin to thefiduciary duties of a trustee exercising a power of sale (at [122]). It must exercise its power of sale inthe interests of all the subsidiary proprietors as a body (at [123]). A sale committee must thereforeact as a prudent owner to obtain the best price reasonably obtainable for the entire development (at[133]). As such, there is no point of time in a collective sale where a sale committee may act solely inthe interests of any group of subsidiary proprietors, whether they are consenting or objecting to thecollective sale (at [107]).

73 The duty of good faith that a sale committee owes to the subsidiary proprietors is a broad one.The Court of Appeal held at [131] – [133]:

131 In our view, “good faith” in s 84A(9)(a)(i)(A) is not merely confined to whether the saleprice is fair or not, but also how the price is arrived at. The collective sale agreement is governedby the common law. Its formation, validity, expiry and renewal are subject to the common law.The duties of the [sale committee] are subject to the substantive law (common law and equity)to the extent that they have not been supplanted by the [Act]. Suppose a case where thedecision of an SC is tainted by a number of its members being bribed by the purchaser, as aresult of which the SC votes in favour of the sale, is the STB’s role confined to simply determiningwhether the price is a fair price and whether the SC has fulfilled its original mandate? Can theSTB ignore facts showing that a better price could have been obtained by simply holding that theSC has fulfilled its original mandate? In our view, an affirmative answer cannot be legally correct.It is not correct because Pt VA of the LTSA does not abrogate or purport to abrogate allsubstantive law principles. In our view, therefore, in considering whether there is good faith inthe transaction, regard should be had to what is good faith at substantive law.

132 In Dynamic Investments… the High Court reviewed several English cases involving themeaning of “good faith” in specific statutory contexts… and concluded that the “core meaning” of“good faith” under s 84A(9) of the LTSA involved just “honesty or absence of bad faith” (at [17])… However, the meaning of good faith is always contextual….

133 In our view, the term “good faith” under s 84A(9)(a)(i) must be read in the light of theSC’s role as fiduciary agent (at substantive law and, now, under s 84A(1A)), and whose power ofsale is analogous to that of a trustee of a power of sale. Thus, in our view, the duty of goodfaith under s 84A(9)(a)(i) requires the SC to discharge its statutory, contractual and equitablefunctions and duties faithfully and conscientiously, and to hold an even hand between theconsenting and the objecting owners in selling their properties collectively. In particular, an SCmust act as a prudent owner to obtain the best price reasonably obtainable for the entiredevelopment… The issue before this court is whether the [STB] made errors in law in holding thatthe SC acted in good faith in the transaction in selling the Property to HPL at $500m in themanner and at the time it did, having regard to all the circumstances that might have had abearing on the price of [Horizon Towers].

74 The fiduciary duties which a sale committee owes the subsidiary proprietors as a body include(at [124] and [134]):

(a) A duty of loyalty and fidelity;

(b) A duty of even-handedness;

(c) A duty to avoid any conflict of interest;

(d) A duty to make full disclosure of relevant information; and

(e) A duty to act with conscientiousness.

75 In the specific factual context of the collective sale of Horizon Towers, the Court of Appealfound that the First SC owed the following specific fiduciary duties to all of the subsidiary proprietors:

(a) A duty to increase the prospects of obtaining the best price by exercising due diligence inappointing a competent property agent to market the property and negotiate with potentialpurchasers;

(b) A duty to follow up on all expressions of interest and offers that result from its marketingefforts;

(c) A duty to try and create competition between interested purchasers where reasonable toobtain the best sale price;

(d) A duty to inform itself of matters relevant to the decision to sell the property and takeadvice from appropriate experts on when and at what price to sell the property;

(e) A duty to obtain an independent valuation prior to settling on the final sale price,particularly where the market is in a state of flux;

(f) A duty to wait for the most propitious timing for the sale in order to obtain a best price. Asale committee should not settle for the reserve price or the market value of the property if thereis a reasonable basis to believe (ie with the benefit of independent expert advice) that a betterprice may be obtained within a reasonable time frame in the future;

(g) A duty to disclose to all subsidiary proprietors any personal interest on the part of itsmembers that might conflict with the duty to obtain the best sale price, either prior to theappointment of the member having the interest (in the case of pre-appointment interests) or wellbefore the sale committee makes a decision to sell the property (in the case of post-appointmentinterests); and

(h) A duty to seek fresh instructions or guidance from the consenting subsidiary proprietorsfrom whom it draws its mandate whenever there is reasonable doubt as to the proper course toadopt.

Court of Appeal’s holdings of law are binding

76 I am bound by this part of the decision of the Court of Appeal in Ng Eng Ghee (CA). Bothdefendants accept that to be the case, while reserving the right to argue to the contrary if thismatter goes on appeal. I am therefore constrained to hold that the defendants as members of theFirst SC stood in the position of an agent, and therefore a fiduciary, to the subsidiary proprietors(including the plaintiffs) and owed them all of the duties laid out at [75] above.

77 I cannot, however, ignore the fact that it was only in Ng Eng Ghee (CA) that it became clearthat a sale committee is an agent of all the subsidiary proprietors from the time of its appointment.The fiduciary relationship between a sale committee and the subsidiary proprietors revealed in Ng EngGhee (CA) is not the traditional principal/agent paradigm and is a novel one. This observation willacquire significance in my discussion of equitable compensation.

Second issue: did the defendants’ breach their fiduciary duties to the plaintiffs?

Court of Appeals found multiple breaches by the First SC

78 On the facts of Ng Eng Ghee (CA), the Court of Appeal held that the First SC breached itsduties to the subsidiary proprietors in the following specific ways (at [210(b)]):

(a) failing to act with due diligence and transparency in appointing a property agent;

(b) failing proactively to follow up on the Vineyard offer and other expressions of interest;

(c) failing to use the Vineyard offer as leverage in negotiations with HPL;

(d) failing to obtain advice from an independent property expert before the sale;

(e) acting with undue haste in selling to HPL in a surging property market when there was nolegal or moral obligation to do so;

(f) deciding to sell to HPL even though the defendants were in undisclosed potential conflict ofinterest because of their undisclosed purchase of an additional unit each;

(g) failing to consult (or even notify) the consenting subsidiary proprietors to seek furtherinstructions despite the surge in the market after the consenting subsidiary proprietors had giventheir mandate to sell at the reserve price.

79 The plaintiffs argue that these findings of breach of duty bind the defendants, as they weremembers of the First SC. The defendants, on the other hand, argue that these findings do not bindthem because the Court of Appeal made these findings in breach of natural justice: the defendantshad no opportunity to be heard in CA120 or in the proceedings giving rise to it. The defendants arguetherefore that the plaintiffs must prove breach in this consolidated action as an essential element oftheir claim. To that end, the defendants led substantial evidence in this action to satisfy me that

they did not breach their fiduciary duties. [note: 8] This evidence was not available in CA120 or inSTB43 which gave rise to CA120. The defendants’ case is that if this evidence had been available,the Court of Appeal might well have made different findings on breach than it did in Ng Eng Ghee (CA).Therefore, argue the defendants, I can and should make my own findings whether they had breachedtheir duties. In response, the plaintiffs say that the defendants had every opportunity to come cleanand give evidence in STB43 chose not to do so. Therefore, the plaintiffs say, the defendants cannottry now belatedly to rectify the consequences of their deliberate choice.

80 I have no hesitation in rejecting the defendants’ allegation that the Court of Appeal deniedthem natural justice in CA120. I do so for the following reasons, which I first summarise and thenexpand upon:

(a) The Court of Appeal was well aware of the importance of direct evidence from the twodefendants. It would not, therefore, have made findings against the two defendants which wereessential for its decision in the absence of such evidence.

(b) The only finding that the Court of Appeal made against the defendants – and the onlyfinding that was necessary for its decision – is that the defendants were in potential conflict ofinterest. That finding was perfectly open to the Court of Appeal on the evidence before it.

(c) As for the other breaches of fiduciary duties, the Court of Appeal did not attribute thosebreaches to specific members of the First SC.

Court of Appeal knew the importance of hearing from the defendants

81 The Court of Appeal said expressly that the evidence of the first defendant was key informationin the collective sale proceedings when it held that the STB had erred in shutting it out (at [56]):

An STB is not a court of law. Its key duty is to ensure that there is good faith in a givencollective sale. Its findings of fact are critical. Yet, by refusing to subpoena Arjun Samtani [thefirst defendant], the Horizon Board effectively deprived itself of key information, for example,

pertaining to Arjun Samtani's involvement in the preliminary steps prior to the commencement ofthe collective sale, his reasons for the purchase of the additional unit at a significant pointimmediately preceding the sale process and, vitally, his precise role as well as influence on theother SC members in the sale decision. Instead, as an unhappy compromise, the Horizon Boardirresolutely indicated that the objectors could file another application with the necessary details.No such application was eventually filed given the constraints of time.

[emphasis added]

82 Having noted the STB’s error in arriving at its decision without this key information, the Court ofAppeal is hardly likely to have fallen itself into the error of arriving at its decision without this keyevidence. It did not. As will be seen, the Court of Appeal had sufficient material before it to make allthe findings of fact against the First SC which the Court of Appeal considered were necessary for itsdecision.

83 The Court of Appeal did not make its findings of breach in vacuo. It made its findings after thelower tribunals had heard from the First SC. Other members of the First SC were cross-examined andtheir evidence was in the record. The Court of Appeal therefore had access to ample oral anddocumentary evidence which allowed it to make each of the findings of breach by the First SC set outin [78] above, notwithstanding that the defendants elected to remain silent. The defendants cannoteven plausibly argue that the Court of Appeal breached the rules of natural justice in arriving at thesefindings, with one possible exception.

Court of Appeal was concerned with potential conflict

84 That one possible exception is the Court of Appeal’s finding in [78(f)] above. An argument thatthe Court of Appeal denied the defendants natural justice in respect of this finding would be plausibleif the Court of Appeal had found that the defendants were in actual conflict of interest in taking thedecision to sell. But the Court of Appeal made no such finding. As the plaintiffs themselves point out

in their closing submissions, [note: 9] the Court of Appeal’s decision rested not on a finding that thedefendants were in actual conflict of interest but on a finding that the defendants were in potentialconflict of interest, unmitigated by disclosure of that potential conflict to all subsidiary proprietors.

85 This is apparent on the face of the Court of Appeal’s reasoning.

86 First, the Court of Appeal held that the STB had erred in law in looking for evidence that thedefendants were in actual conflict of interest because the relevant question was whether thedefendants were in potential conflict of interest. The Court of Appeal first set out at length cogentreasons why equity focuses on potential conflict rather than actual conflict (at [137] – [145] underthe heading “Duty to avoid any potential conflict of interest”) and the importance equity places onthe duty of full disclosure (at [146] – [152]). The Court of Appeal then went on to say (at [200]):

In respect of the [STB’s] findings [of no actual conflict and on disclosure]… the Horizon Board hasfound as a fact that the SC members who purchased additional units were not in a position of aconflict of interest because it was apparently also in their interest to sell their units at the bestprice in order to obtain the highest profit. We have at [188] above doubted the logic and thetruth of this finding. However, we do not need to overrule it as a finding of fact. It is a sufficientbasis for the appeal to succeed on this point that, in our view, the Horizon Board… applied thewrong legal test for conflict of interest by focusing on actual conflict. As set out above at [138]–[145], the correct question to ask was whether there was a possible conflict of interest arisingout of the additional purchases of units…

[emphasis in original]

Having relied on this error of law – amongst others (the full list is at Ng Eng Ghee (CA) at [197]) – toreverse the STB’s decision, it is scarcely arguable that the Court of Appeal made a finding that thedefendants were in actual conflict of interest, when it expressly held that that finding wasunnecessary to decide the case before it and when the necessary evidence was not in the record ofappeal.

87 Second, when the Court of Appeal assessed both defendants’ failure to give evidence, it was inthe context of a potential conflict of interest and their failure to disclose that potential conflict ofinterest (at [189]):

Arjun Samtani [the first defendant] and Tan Kah Gee [the second defendant] elected not totestify to explain their failure to disclose their additional purchases to the other original SCmembers or to the subsidiary proprietors. Even Henry Lim (who was one of only two original SCmembers who testified before the Horizon Board… ) thought that disclosure of the ownership ofthe new units was necessary. (William Kwok also did not disclose his purchase of an additionalunit when he became a member of the SC in February 2007; we recognise, however, that hispotential conflict of interest cannot be a basis for impugning the good faith of the decision tosell to HPL since that decision was made before he joined the SC.) The subsequent attempt (in oraround April 2007) by the original SC's solicitors to ascertain the position of the original SCmembers in relation to any potential conflicts of interest also demonstrated that the solicitorseventually thought this was a relevant concern. For completeness we should point out that ArjunSamtani claimed in his 30 April 2007 letter to the original SC's solicitors that he had disclosed hisextra unit in response to an earlier query from the solicitors, but if this is true then it is equallypuzzling that neither Arjun Samtani nor the solicitors disclosed this in turn to the other SCmembers or the subsidiary proprietors. As it turned out, the other subsidiary proprietors onlyfound out about the additional units in May 2007, after the application to the Horizon Board forthe collective sale of Horizon Towers had been filed.

[emphasis in italics in original; emphasis added in bold italics]

88 Third, the Court of Appeal was very careful in its use of the terms “potential conflict ofinterest” and “actual conflict of interest” in Ng Eng Ghee (CA). It refers to “potential” or “possible”conflict of interest at [107], [139], [150], [165], [168(h)], [173], [188], [189], [192] and [210(b)(iv)] of the judgment. These are the key passages where the Court of Appeal is expressing its ownview on why it is only potential conflict which is relevant for the inquiry under s 84A of the Act. Bycontrast, it refers to “actual” conflict of interest at [138], [142], [144], [145], [197(c)] and [200] ofthe judgment. All of these references appear where the Court of Appeal emphasises why it is thepotential conflict and not the actual conflict which ought to be the subject of the inquiry under s 84Aof the Act.

89 It is true that at [188] and [190] of Ng Eng Ghee (CA), the Court of Appeal appears to draw aninference, reinforced by the defendants’ silence, that an actual conflict of interest motivated them topush for a quick collective sale to HPPL and therefore to accept the bird in the hand instead ofpursuing the two in the bush. However, these two passages cannot be read in isolation and out ofcontext. When these passages are read in context and read in light of the points I have made in [84]– [88] above, it is clear that these two passages are mere observations, intended to illustrateprecisely why an undisclosed potential conflict of interest is capable of showing that a collective saletransaction is not a transaction in good faith within the meaning of s 84A of the Act, and notintended to be findings of fact as to what actually happened in the collective sale of Horizon Towers..

90 It is indisputable that the defendants were in potential conflict of interest. The Court of Appealmade no finding beyond that that. That finding alone sufficed for the Court of Appeal’s approach tosetting aside the collective sale order. That finding suffices also to establish the defendants’ liabilityin principle for equitable compensation in the action before me. As the plaintiffs point out, theevidence led by the defendants which showed that they were not in actual conflict of interestbecause they were under no financial pressure to sell their additional units was therefore beside the

real point. [note: 10] That evidence cannot establish a defence to the plaintiffs’ claim and is thereforenot something I need to take into consideration.

Court of Appeal made findings against the First SC as a body

91 In order for the Court of Appeal in Ng Eng Ghee (CA) to set aside the collective sale order, itwas unnecessary for it to go on and attribute individual responsibility for the breaches of fiduciaryduties to any specific member of the First SC. In Ng Eng Ghee (CA), the question was whether theFirst SC breached its fiduciary duties, and in particular, the core duty of fidelity. To set aside thecollective sale order, the Court of Appeal needed to find only that the First SC as a body breached itsfiduciary duties and not that any particular fiduciary had breached his duty. The reason for this isexplained in Alastair Hudson, Equity and Trusts (Routledge-Cavendish, 7th Ed, 2013) at p 864:

Where there is more than one trustee, those trustees are expected to act jointly… [I]t would beexpected that liability for breach of trust would attach to the trustees jointly and severally, nomatter which of them was directly responsible for the breach of trust. The trustees are jointlyliable in that each of them is equally liable for any breach of trust, subject to what is said below[the qualifications discussed by the author are not relevant for our purposes]. …

The reason for all of these trustees being held to be jointly and severally liable for the breach oftrust is that to do otherwise would encourage trustees to take no responsibility for the decisionsmade in connection with their trusteeship. That is, it would be attractive to individual trustees totake no part in the management of the trust so that they could claim later not to have beenresponsible for any decision or action. It has been held that encouraging the trustees to act inthis way would be an ‘opiate on the consciences of the trustees’, whereas it is in the interests ofthe beneficiaries to have all of the trustees taking an active part in the management of the trustso that they exercise control over one another [citing Bahin v Hughes (1886) 31 Ch D 390, at 398per Fry L]. Thus all of the trustees are made equally liable for any loss to the trust.

92 In Bahin v Hughes (1886) 31 Ch D 390, one of the questions was whether a non-acting trusteecould seek an indemnity from an acting trustee for a breach of trust by the co-trustee. The non-acting trustee testified that he had not been willing to mortgage trust assets, but did so at theinsistence of the co-trustee. The English Court of Appeal found that both trustees were equallyresponsible for the breach of trust which resulted. It disallowed the non-acting trustee’s applicationfor an indemnity from the acting trustee. Fry LJ held (at 398):

In my judgment the Courts ought to be very jealous of raising any such implied liability as isinsisted on, because if such existed it would act as an opiate upon the consciences of thetrustees; so that instead of the cestui que trust having the benefit of several acting trustees,each trustee would be looking to the other or others for a right of indemnity, and so neglect theperformance of his duties. Such a doctrine would be against the policy of the Court in relation totrusts.

In the present case, in my judgment, the loss which has happened is the result of thecombination of the action of Miss Hughes with the inaction of Mr. Edwards. If Miss Hughes has

made a mistake, it was through simple ignorance and want of knowledge, and if on the otherhand Mr. Edwards had used all the diligence which he ought to have done, I doubt whether anyloss would have been incurred. The money might have been recovered before the property wentdown in value.

93 The Court of Appeal therefore did not need to make any findings which were essential for itsdecision against specific individuals. If it had needed to do so, it would undoubtedly have been aliveto the rules of natural justice and would have allowed those individuals a right to be heard in theirown defence.

94 The plaintiffs now sue the defendants as members of the First SC. Personal liability of eachindividual member of the First SC was not at issue in CA120 and is not an issue before me. Rather, thedefendants are held liable for the actions of the First SC not because of personal default but becausethey are jointly liable with all its other members. The First SC was undoubtedly heard in the collectivesale proceedings which culminated in CA120. There was no breach of natural justice.

Defendants’ submission of no breach is an abuse of process

95 Of course, the Court of Appeal arrived at these conclusions on breach of fiduciary duties not forthe purposes of determining the liability of the First SC to compensate the plaintiffs in equity but todetermine the only question which was before the Court of Appeal: whether, within the meaning of s84A(9)(a)(i)(A) of the Act, the collective sale transaction was not in good faith after taking intoaccount the sale price.

96 The issue which then arises for me is whether the Court of Appeal’s findings on that question ofmixed fact and law preclude the defendants from asserting before me that the First SC was not inbreach of its fiduciary duties. The position on issue estoppel is summarised in Spencer Bower and

Handley, Res Judicata (LexisNexis, 4th Ed, 2009) at p 103:

A decision will create an issue estoppel if it determined an issue in a cause of action as anessential step in its reasoning. Issue estoppel applies to fundamental issues determined in anearlier proceeding which formed the basis of the judgment.

97 The dicta of Diplock LJ (as he then was) in Thoday v Thoday [1964] P 181 CA (at 197-198)was quoted with approval in Thrasyvoulou v Secretary of State for the Environment [1990] 2 AC 273(“Thrasyvoulou”) at 295-6:

The particular type of estoppel relied upon by the husband is estoppel per rem judicatam. This isa generic term which in modern law includes two species. The first species, which I will call'cause of action estoppel,' is that which prevents a party to an action from asserting or denying,as against the other party, the existence of a particular cause of action, the non-existence orexistence of which has been determined by a court of competent jurisdiction in previous litigationbetween the same parties. If the cause of action was determined to exist, i.e., judgment wasgiven upon it, it is said to be merged in the judgment, or, for those who prefer Latin, transit inrem judicatam. If it was determined not to exist, the unsuccessful plaintiff can no longer assertthat it does; he is estopped per rem judicatam. This is simply an application of the rule of publicpolicy expressed in the Latin maxim 'Nemo debet bis vexari pro una et eadem causa.' In thisapplication of the maxim, 'causa' bears its literal Latin meaning. The second species, which I willcall 'issue estoppel,' is an extension of the same rule of public policy. There are many causes ofaction which can only be established by proving that two or more different conditions are fulfilled.Such causes of action involve as many separate issues between the parties as there are

conditions to be fulfilled by the plaintiff in order to establish his cause of action; and there maybe cases where the fulfilment of an identical condition is a requirement common to two or moredifferent causes of action. If in litigation upon one such cause of action any of such separateissues as to whether a particular condition has been fulfilled is determined by a court ofcompetent jurisdiction, either upon evidence or upon admission by a party to the litigation,neither party can, in subsequent litigation between one another upon any cause of action whichdepends upon the fulfilment of the identical condition, assert that the condition was fulfilled if thecourt has in the first litigation determined that it was not, or deny that it was fulfilled if the courtin the first litigation determined that it was.

98 The plaintiffs do not, however, rely on res judicata or issue estoppel. They cannot, because itis clear that the defendants were not parties to CA120 in their capacity as members of the First SC.They were parties only in their capacity as consenting subsidiary proprietors and even then onlybecause the respondents in CA120 were nominal respondents nominated by the sale committee torepresent all consenting subsidiary proprietors under the terms of the CSA. The plaintiffs’ case,instead, is that the defendants are precluded by the extended doctrine of res judicata from

challenging the finding in Ng Eng Ghee (CA) that the First SC breached its duties. [note: 11]

99 The extended doctrine of res judicata precludes, as an abuse of process, a party from pursuinga claim or a defence for the purpose of mounting a collateral attack upon a final decision made by acourt of competent jurisdiction in earlier proceedings when that party had the full opportunity tocontest the decision in the earlier proceedings: see Hunter v Chief Constable of the West MidlandsPolice and others [1982] AC 529 at 541. The extended doctrine of res judicata forms part ofSingapore law: see Lee Hiok Tng (in her personal capacity) v Lee Hiok Tng and another (executorsand trustees of the estate of Lee Wee Nam, deceased) and others [2001] 1 SLR(R) 771 at [25]; LaiSwee Lin Linda v Attorney-General [2006] 2 SLR(R) 565 at [62]; and Goh Nellie v Goh Lian Teck andothers [2007] 1 SLR(R) 453 at [19].

100 The extended doctrine of res judicata does not require that the parties to both suits be thesame. That must be so: the whole point of the extended doctrine of res judicata is to avoid anunnecessary and undesirable proliferation of proceedings relating to the same subject-matter: see thespeech of Wigram VC in Henderson v Henderson (1843) 3 Hare 100. To hold otherwise would allow aplaintiff with a cause of action against a number of severally-liable defendants to bring successiveseparate actions against each defendant until he got the desired result. To permit that would lead toa multiplicity of proceedings, the possibility of inconsistent findings of fact and would fail to achievefinality in litigation.

101 In my view, it is an abuse of process within the extended doctrine of res judicata for thedefendants now to deny that they were in breach of their fiduciary duties as members of the First SC.Each of the Court of Appeal’s findings set out at [78] above was an essential step for it to arrive atits decision to set aside the collective sale order. I accept the plaintiffs’ submission that thedefendants had every opportunity to put their side of the story forward before the STB, before ChooJ in OS11 and before the Court of Appeal in CA120, either through the persons having the carriage ofthose proceedings or separately of their own initiative. They chose not to do so. I have no doubt thatthey did not do so because, by the time the Collective Sale Application was filed in April 2007, it wasclear that the collective sale was a very bad bargain indeed for all subsidiary proprietors. It was nolonger in the self-interest of any subsidiary proprietor, including the defendants, for the collective saleto succeed. But that makes no difference. Whether the defendants’ failure to put their side of thestory forward in the earlier litigation was the result of an innocent oversight, a negligent omission or adeliberate tactical choice, the result is the same: they are precluded from trying to put their side ofthe story forward now.

102 The Court of Appeal set aside the collective sale order because it was satisfied that the FirstSC’s breaches of fiduciary duties meant that the collective sale was not a transaction in good faithafter taking into account the sale price within the meaning of s 84A of the Act. Although it arises in adifferent context, the question before me on breach of fiduciary duties is the same question whichthe Court of Appeal considered and answered in CA120. The defendants’ invitation to me to decideafresh whether they were in breach of their fiduciary duties is in fact an invitation to me to ignorefindings of fact by the Court of Appeal which were essential to its decision in CA120. That invitation isan abuse of process. I am unable to accept it. I am therefore bound by the decision in Ng Eng Ghee(CA) to hold that the defendants were in breach of their fiduciary duties to the plaintiffs.

Third issue: did the defendants’ breach of their fiduciary duties cause loss to the plaintiffs?

Equitable compensation and causation

103 The parties have referred to the plaintiffs’ claim as a claim for “damages” throughout theirpleadings and the proceedings. But the plaintiffs’ statement of claim – drawing on the Court ofAppeal’s judgment in Ng Eng Ghee (CA) – is founded upon breaches of duties by the defendants as

fiduciaries. [note: 12] Damages at common law is not a remedy available in equity for a breach offiduciary duties. The appropriate equitable remedy is equitable compensation (see Quality AssuranceManagement Asia Pte Ltd v Zhang Qing and others [2013] SLR 631 (“QAM”) at [32] – [33]).

104 In QAM, I considered the position of a fiduciary who breaches his core duties of honesty andfidelity. I began by repeating Millett LJ’s caution in Bristol and West Building Society v Mothew [1998]Ch 1 at 16C (“Mothew”) against indiscriminately treating every breach of duty by a fiduciary as abreach of fiduciary duty. An award of equitable compensation to restore the trust property to itsoriginal state or as compensation for a breach of the core fiduciary obligations of honesty and fidelitystands on a different footing from an award of equitable compensation for breach of a fiduciary’sequitable duties of skill and care.

105 I set out in full what Millett LJ said in Mothew (at 17G-H):

Although the remedies which equity makes available for breach of the equitable duty of skill andcare is equitable compensation rather than damages, this is merely the product of history and inthis context is in my opinion a distinction without a difference. Equitable compensation for breachof the duty of skill and care resembles common law damages in that it is awarded by way ofcompensation to the plaintiff for his loss. There is no reason in principle why the common lawrules of causation, remoteness of damage and measure of damages should not be applied byanalogy in such a case. It should not be confused with equitable compensation for breach offiduciary duty, which may be awarded in lieu of rescission or specific restitution.

106 I then went on in QAM to review the authorities on equitable compensation and arrived atcertain conclusions as to the principles on which equity awards equitable compensation for breachesof the core duties of honesty and fidelity. I summarise those conclusions below:

(a) The deterrent function of equitable compensation means that the common law principles ofcausation, foreseeability and remoteness do not “readily” apply to equitable wrongdoers: In reDawson (deceased); Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR211 at 215; Kumagai-Zenecon Construction Pte Ltd v Low Hua Kin [1999] 3 SLR(R) 1049 at [35];Firstlink Energy Pte Ltd v Creanovate Pte Ltd and another action [2007] 1 SLR(R) 1050 at [85].

(b) In one class of cases, therefore, equity holds a breaching fiduciary liable to pay equitablecompensation without regard to the principles of causation, foreseeability and remotenessincluding even the need for fundamental “but for” causation: Brickenden v London Loan & SavingsCompany of Canada [1934] 3 DLR 465 (“Brickenden”) (at [16]).

(c) There is another class of cases in which equity holds a breaching fiduciary liable to payequitable compensation only if the “but for” test of causation is satisfied: Target Holdings Ltd vRedferns (a firm) and Another [1996] 1 AC 421 (“Target Holdings”) at 432E and 434C. That iswhat the word “readily” in the statement of principle in [106(a)] above signifies: QAM at [50].

(d) I did not have to decide in QAM what constituted the dividing line between the Brickendenclass of cases and the Target Holdings class of cases.

(e) Where a case falls within the Target Holdings class of cases, and but-for causation isaccordingly essential for liability to pay equitable compensation, the burden of proving but-forcausation rests on the plaintiff: Ohm Pacific Sdn Bhd v Ng Hwee Cheng Doreen [1994] 2 SLR(R)633 at [27].

1 0 7 Brickenden and QAM were cases in which a fiduciary in a well-established category offiduciaries committed highly culpable breaches of his irreducible core fiduciary obligations of honestyand fidelity. A fiduciary’s duties of skill and care, prudence and diligence do not form part of theirreducible core of a fiduciary’s obligations: Spread Trustee Co Ltd v Hutcheson and others [2012] 2AC 194 at [165] citing with approval the judgment of Millett LJ (as he then was) in Armitage v Nurse[1998] Ch 241 at 253-254.

108 The result of the foregoing analysis is that:

(a) Any fiduciary’s liability for breaches of his duties of skill and care and of prudence anddiligence are subject to the doctrines of foreseeability, causation and remoteness: Mothew.

(b) A fiduciary who is in one of the well-established categories of fiduciaries and who commitsa culpable breach of his core duties of honesty and fidelity is liable to pay equitable compensationeven if the object of those duties is unable to prove but-for causation: Brickenden.

(c) A fiduciary who is in one of the well-established categories of fiduciaries and who causesloss to the trust property as a result of an innocent breach of his fiduciary duties is not liable toreconstitute the trust property unless the object of those duties is able to prove at least a but-for causal connection between the breach of fiduciary duty and the loss to the trust fund:Target Holdings.

Do the plaintiffs have to prove but-for causation?

109 The question now is whether the plaintiffs’ claim against the defendants falls within theBrickenden class of cases (where but-for causation is not essential for liability) or the Target Holdingsclass of cases (where but-for causation is essential for liability). I consider in this section only thescope of the fiduciary relationship between the sale committee and the plaintiffs, as objectingsubsidiary proprietors. The analysis of the sale committee’s relationship with the consenting subsidiaryproprietors will be quite different, with the position overlaid with contract (see Ng Eng Ghee (CA) at[116]).

Fiduciary’s equitable duties of care and skill, diligence and prudence

110 Of the catalogue of breaches by the First SC identified by the Court of Appeal (see [78]above), there is only one breach which is framed as a breach of the core fiduciary obligation ofhonesty and fidelity. That is the finding that the sale committee decided to sell to HPPL even thoughthe defendants were faced a potential conflict of interest which remained, at that time, undisclosedto all subsidiary proprietors. All of the other breaches found in Ng Eng Ghee (CA) were framed in thelanguage of negligence. They are breaches of a fiduciary’s duties of care and skill, diligence andprudence. Mothew is authority that the defendants’ liability to pay equitable compensation for thesebreaches is subject to all of the principles developed by the common law. These includeforeseeability, causation and remoteness.

Fiduciary’s equitable duty of honesty and fidelity

111 As far as the breach of the core duty of honesty and fidelity is concerned, there was nosuggestion by the plaintiffs before the Court of Appeal, and therefore there is no finding by the Courtof Appeal, that the defendants failed to act honestly. I am concerned therefore only with a breach ofa fiduciary’s core duty of fidelity.

112 In my view, the defendants’ breach of their duty of fidelity falls within the Target Holdings lineof cases. The plaintiffs must therefore establish but-for causation in order to succeed. I arrive at thisconclusion for a number of reasons.

113 First, Ng Eng Ghee (CA) makes clear that a sale committee’s relationship with the objectingsubsidiary proprietors is not a classic principal/agent relationship. Instead, it is a sui generis andmodern analogue of agency which differs in significant respects. The Court of Appeal itselfacknowledged in Ng Eng Ghee (CA) that a sale committee’s “agency” relationship does not have all ofthe features of a classic principal/agent relationship (at [104]). By way of example, the irreduciblecore of any principal/agent relationship is a principal who consensually confers actual, implied orostensible authority upon the agent and an agent who has the ability, by acting within the scope ofhis authority, unilaterally to engage the principal’s civil liability. A sale committee’s relationship asagent for the objecting subsidiary proprietors now has its foundation in statute (see Ng Eng Ghee(CA) at [105]) and has neither of these hallmarks. An objecting subsidiary proprietor neverconsensually confers any authority upon a sale committee. And a sale committee has no powerunilaterally to negotiate with potential purchasers on behalf of the objectors, unilaterally to compelthe objectors to sell their flats to the purchaser or otherwise unilaterally to engage the objectors’ civilliability in contract to do so. A sale committee’s only power under the statutory scheme is to makeapplication to the STB to approve and order the collective sale. And a sale committee cannot even dothat unless the statutory majority necessary for the application has been reached. So it is only in thisbroad sense that a sale committee is the analogue of an agent because it “has the power to affectthe legal relations of all the subsidiary proprietors with third parties” (Ng Eng Ghee (CA) at [104]).

114 Second, the Court of Appeal did not hold that this sui generis agency relationship constitutes asale committee an actual trustee of its power of sale for the subsidiary proprietors or that a salecommittee’s duties are identical to those of a trustee exercising a power of sale. Instead, it held thata sale committee’s duties “are akin to those of a trustee with a power of sale” [emphasis added] (at[121]), that “it must exercise the power of sale granted to it in the same way as a trustee of hispower of sale” [emphasis added] (at [123]) and that its “power of sale is analogous to that of atrustee of a power of sale” [emphasis added] (at [133]). It is true that the Court of Appeal refers onoccasion to a sale committee as a trustee (see for example the heading immediately before [118] andin [124]) in a collective sale rather than as the analogue of a trustee. But I do not read thesereferences as the Court of Appeal resiling from its position that a sale committee’s fiduciary duties toobjectors are analogous to those of a trustee exercising a power of sale rather than identical to those

duties. I say this for two reasons.

(a) A sale committee cannot be a trustee of a literal power of sale because a sale committeehas no power of sale in the same sense as a trustee who holds a power of sale conferred by asettlor. A trustee holds legal title to trust property and can therefore can dispose of the trustproperty unilaterally, without impediment. A sale committee holds legal title to nothing – not eventhe common property – and cannot dispose of anything unilaterally. As I have said above, all itcan do is to make application to the STB for a collective sale order, and even that, only when thestatutory majority is achieved.

(b) The Court of Appeal in Ng Eng Ghee (CA) held that because a sale committee “is the agentof the subsidiary proprietors collectively, there is no point at which the [sale committee] may actsolely in the interests of any group of subsidiary proprietors, whether they are consenting orobjecting proprietors.” The sale committee must therefore hold an even hand between theinterests of the consenters and the objectors from the time that their interests are differentiated(see [107]; and also [116]). But a sale committee must of necessity work throughout a collectivesale process actively and directly against the desires and interests of those subsidiary proprietorswho do not wish to sell their flats. The sale committee will act against those subsidiaryproprietors’ interests when it solicits signatures for the collective sale agreement in order toreach the statutory majority and trigger the condition precedent to force the objectors to selltheir flats. It will act against those interests when it negotiates with potential purchasers to seta price at which to force the objectors to sell their flats. And it will act against those interestswhen it takes out and pursues to its conclusion a collective sale application, arguing against theobjections of the objectors – no matter how strenuous and heartfelt their wish to save theirhomes – and obtains a collective sale order to force them to sell their flats against their will. Indoing all of these things, the sale committee will be acting exclusively in accordance with thedesires and interests of those who wish to sell and contrary to the desires and interests of thosewho don’t. If a sale committee were in fact an actual trustee instead of an analogue of a trustee,and even if it carried out all of these acts honestly, it would by doing so be in clear andactionable breach of its core fiduciary duty of fidelity. That cannot have been the intent of theCourt of Appeal or of the statutory scheme under which a sale committee operates.

115 Third, the defendants’ breach of the duty of fidelity was an innocent breach. While thedefendants undoubtedly put themselves in a position of potential conflict by purchasing an additionalflat each and undoubtedly failed to make the necessary full and proper disclosure to all subsidiaryproprietors of their potential conflict, they equally took no steps to hide their additional purchases:

(a) The first point, of course, is that each bought his second flat in his own name (albeit witha co-purchaser) and not through nominees or corporate vehicles. That indicates to me that eachof them saw no reason to hide their purchases. The plaintiffs suggested in cross-examination thatthe first defendant that he tried to hide his purchase of his second flat by using his son as anominee. It is true that that was the original intention, but in the event, it was the firstdefendant who was the registered legal co-owner of the flat together with his daughter uponcompletion on 16 June 2006.

(b) D&N, as solicitors to the First SC, was tracking new purchases of units in Horizon Towersin the second quarter of 2006. Their purpose was to inform each new subsidiary proprietorpersonally about the CSA and to invite them to sign it. Thus, an email string between D&N, FirstTree and all members of the First SC dated 6 June 2006 includes each defendant by name in the

list of recent purchasers of flats Horizon Towers. Further, on 31 May 2006 [note: 13] and on 6

June 2006, [note: 14] D&N wrote to each defendant and his co-purchaser as co-owners of their

new flat in Horizon Towers to inform them about the CSA and to invite them to sign it.

(c) On 12 June 2006, D&N circulated to all members of the First SC and to First Tree anupdated status list showing, at serial numbers 18 and 116 of that list, each defendant by nameas the co-purchaser of a flat pending completion.

(d) Both defendants’ ownership of their respective additional flats was reflected in the list of

consenting subsidiary proprietors dated 6 July 2006 circulated to the First SC. [note: 15] MrLawrence Eu, a member of the First SC, gave evidence that he was aware of the first

defendant’s purchase of a second flat from this list. [note: 16]

(e) On 11 July 2006, D&N corresponded with the first defendant’s conveyancing solicitors toclarify the exact date of completion and registration of the first defendant and his daughter asthe new owner of their recently-purchased flat.

(f) The second defendant’s evidence was that he disclosed the additional purchase in May2006 when he asked D&N about the consequences for him in a collective sale if his tenant

refused to vacate his second unit. [note: 17] I accept the second defendant’s evidence.

(g) The second defendant’s evidence was that he had told Mr Then, one of the plaintiffs inS1084, of his intention to purchase another flat in Horizon Towers in view of the potential

collective sale. [note: 18] Mr Then did not testify to rebut this. I accept the second defendant’sevidence.

(h) The second defendant’s evidence was that Ms Sadeli, a realtor and the plaintiff in S1086,showed him a flat in Horizon Towers for him to consider purchasing. Ms Sadeli did not testify torebut this. I accept the second defendant’s evidence.

116 A year later, in April 2007, there was further correspondence with D&N on this issue. It isundoubtedly true that April 2006, not April 2007, is the point in time when the defendants could andshould have made full and proper disclosure of their potential conflict to all subsidiary proprietors. ButI find that this correspondence in April 2007 casts relevant light on the defendants’ continuing stateof mind from April 2006 right up to that point. On 30 April 2007, D&N advised the first defendant ondisclosure as follows:

Our view on this point is that as far as the relevant legislation is concerned, only the relationshipbetween the purchaser and the proprietors is in issue for considering if the transaction is in goodfaith. Whether any SC member has more than one unit is not relevant and neither yourself norKah Gee are likely to be under a duty to disclose that you purchased additional units before thefirst EGM. However, there is nothing wrong, if you or Kah Gee so wish, to disclose this to preventallegations being made against either of you or against the other members of the SC. Do let us

know. [note: 19]

This letter affords the defendants no defence for their failure to make full and property disclosure inApril 2006. But this letter and the advice in it supports the defendants’ assertion that they did nothide their purchases of additional units and were reliably advised – even as late as April 2007 – thatthey were unlikely to have any legal obligation to make formal, full and proper disclosure of theirpurchase of the additional units to the subsidiary proprietors. Neither the defendants nor D&N can befaulted for this view of the law in April 2006 and April 2007: as I have said above, the true extent of asale committee’s fiduciary duties to the subsidiary proprietors was revealed only as a result of the

Court of Appeal’s decision in Ng Eng Ghee (CA) in April 2009. All of this indicates to me that thedefendants’ culpability is at the lower end of the scale.

Conclusion on whether the plaintiffs have to prove causation

117 In conclusion, I hold that the fiduciary relationship between a sale committee and the body ofsubsidiary proprietors is a novel one. It is far-removed from the paradigm fiduciary relationshipbetween a trustee and a beneficiary and other well-established categories of fiduciaries. Further, Ifind that the breach of the duty of fidelity by the defendants was an innocent breach at the lowerend of the scale of culpability. A sale committee’s relationship with subsidiary proprietors is thereforeoutside the Brickenden class of cases and within the Target Holdings class of cases. As such, asubsidiary proprietor who seeks equitable compensation from a sale committee for breach of thefiduciary duty of fidelity must establish a causal link between the sale committee’s breach of thatfiduciary duty and the subsidiary proprietor’s loss.

118 The remainder of the defendants’ breaches are breaches of a fiduciary’s duties of care and skilland diligence and prudence. It is clear that the plaintiffs must establish all of the usual common lawrequirements – including foreseeability, causation and remoteness – to recover equitablecompensation for these breaches (see [105] above).

The defendants’ liability for the plaintiffs’ unrecovered costs

Whether the defendants’ breach caused the plaintiffs’ loss

119 The plaintiffs’ submission on causation is simple: if not for the First SC’s breaches of itsfiduciary duties, the defendants would not have felt compelled to commence or resist any of the legalproceedings in which they incurred the unrecovered costs. I find that that submission is not borne outby the evidence.

120 It is essential to distinguish between cause and effect. To succeed, the plaintiffs must showthat the breaches of fiduciary duty by the First SC caused the plaintiffs to object. Put another way,the plaintiffs must show that if the First SC had not breached their fiduciary duties, the plaintiffswould not have objected to the Collective Sale Application. The plaintiffs cannot succeed in thisaction if the true position is that they were resolved to object to the collective sale and it waspursuing that resolve which led them to discover the First SC’s breaches. In that scenario, theplaintiffs’ decision to object came before – and therefore cannot be caused by – the eventual groundsfound to support the objection. That is so even if those very same grounds were the reason that theCourt of Appeal set aside the collective sale order.

121 For the reasons set out below, I find that the plaintiffs would have resisted the collective salein any event, even if the First SC committed no breaches of its duties.

Breach of core duty of fidelity could not be a but-for cause

122 I deal first with the defendants’ breach of their core fiduciary duty of fidelity. That breach istheir failure to make full and proper disclosure to all subsidiary proprietors of their potential conflict ofinterest. Although it was each defendant’s purchase of an additional flat which put the defendants ina potential conflict of interest, those purchases were not in themselves breaches of duty. The breachof the duty of fidelity was the failure to make disclosure.

123 But assume that the defendants had made full and proper disclosure to all subsidiary proprietors

of their purchases at the EGM in April 2006. What would have happened? The plaintiffs would stillhave objected to the collective sale application. Indeed, disclosure would have entrenched theplaintiffs’ objection on this ground rather than dissipated it. The only difference that disclosure wouldhave made is that their objection would be based on the defendants’ admission rather than on theplaintiffs’ suspicion. That shows that the defendants’ breach of their duty of fidelity by making properformal disclosure of their additional purchases cannot be a but-for cause of the plaintiffs’ decision toobject and for the costs they incurred in doing so.

124 The only remaining breaches of fiduciary duties by the defendants are breaches of theequitable duties of care and skill, diligence and prudence. I have held (at [118]) that the plaintiffsmust establish an unbroken chain of causation leading from these breaches to the unrecovered legalcosts which they now claim. This they have failed to establish.

Position of Mr Darmawan and his wife

125 Mr Darmawan gave evidence to explain his and his wife’s reasons for objecting to the collectivesale. Mr Darmawan’s testimony made clear to me that – to his credit and unlike some of theconsenting subsidiary proprietors – he saw his home first and foremost as a home and not as justanother asset to be monetised. That clarity of vision enabled Mr Darmawan the moral high ground of aconsistent position of principle from the very beginning to the very end of the entire collective saleprocess.

126 Mr Darmawan explained to me his thought process when the collective sale was first mooted.

His initial reaction was neutrality: [note: 20]

Okay. Sorry, your Honour, as I explained, it was a whole host of reasons that my wife and I hadto discuss. We just moved into the unit. We bought it about a year or two before theycommenced the en bloc process.

We just started our family. I had a young son. It was a hassle to move in. I did some renovation.It was also a hassle to have to move out so soon.

So, after our discussions with my wife – you see, you said I was – or I am an experienced banker,so I see things in pro and con [sic]. Right? The pro was the hefty premium. It was exciting at thetime, but the cons were it will be a hassle for me to move. I just moved in. Therefore, on thebalance of things, we decided to just go with the flow.

If they want to make the collective sales successful, let them be and I’ll just go with it and I willcontribute to success of it by not objecting to it.

127 The fact that Mr Darmawan was initially attracted by the 80% premium that he stood to gainfrom a collective sale but nevertheless was not prepared – even before he started to have doubts

about the collective sale process – to sign the CSA [note: 21] confirmed to me that he saw his homeas something he would not voluntarily agree to sell. This I find remained Mr Darmawan’s view, evenafter the statutory majority was reached and the First SC filed the Collective Sale Application.

128 It was at this point that Mr Darmawan changed his mind from neutrality and decided to objectto the collective sale. Mr Darmawan’s evidence was that he changed his mind in March or April 2007,

after the EGM (see [17] above). [note: 22] However, there was no evidence in March or April 2007that the First SC had breached any of its duties in the collective sale process. The plaintiffsdiscovered the evidence of these breaches only in May 2007 after discovery in the first tranche of

Q:

A:

Q:

A:

the Collective Sale Application (Ng Eng Ghee (CA) at [18]). Counsel for the plaintiffs, Mr KannanRamesh SC (“Mr Ramesh”) relied on this during his opening statement, where he contended as follows:[note: 23]

The reason why the plaintiffs resisted the en bloc application was because of the conduct of thevarious individuals which was discovered in the process of litigation, and as a result, the plaintiffsdug in and they sought to establish that the transaction was tainted by bad faith.

…

… The basis for resistance arises from matters that came to our knowledge, came to ourknowledge in the course of the litigation process as to the conduct of specific members of thesale committee.

[emphasis added]

129 Mr Darmawan admitted that he did not know that the defendants had bought additional units

at the time he decided to object. [note: 24] He had “received rumours that there were additional

purchasers [sic]” [note: 25] but he agreed in cross-examination that he would not have changed his

mind to object based on rumour. [note: 26] This was despite the fact that it was the plaintiffs’ casethat the principal concern at that time was the conflict of interest arising from these additional

purchases. [note: 27] If Mr Darmawan was not aware of the existence of this conflict at the time hedecided to object, how could the breach of the duty to disclose a potential conflict of interests havecaused Mr Darmawan to object to the collective sale by actively resisting the Collective SaleApplication from the time it was filed? The plaintiffs provided no satisfactory answer to this question.

130 The only outward indication of a breach of fiduciary duty in March/April 2007 was the fact thatthe First SC had not consulted the consenting subsidiary proprietors about increasing the reserveprice before agreeing the S&P with HPPL. Mr Darmawan testified that this was one of his grounds for

objecting. [note: 28] However, Mr Darmawan’s own evidence is that he learned that there wassomething wrong with the First SC’s decision-making on this issue only during a meeting at TKQP’s

office. [note: 29] The purpose of this meeting was to discuss the grounds on which the plaintiffs andthe other objecting subsidiary proprietors could object to the collective sale. In other words, thedecision to object had already been made and the plaintiffs were now seeking the grounds to supporttheir objection. This meeting was the first discussion of the potential evidence at their disposal whichwould allow them to successfully mount an objection to the collective sale. Mr Darmawan admitted as

much: [note: 30]

And the reason for doing all this was to see whether there were valid grounds to object tothe sale, am I right?

Yes.

So the reason was to oppose the sale, am I right?

Yes.

131 Mr Darmawan testified that the actions of the First SC led the plaintiffs to conclude that it hadbreached its duties in the collective sale process. But even then, he explained that his motivation in

relying on those breaches was the desire “to defend our homes”. [note: 31]

132 Mr Darmawan’s position that his home was not for sale at any price continued throughout hisresistance to the Collective Sale Application. When asked why he filed the judicial review applicationto challenge the STB’s expedited timeline, he testified that “it’s not a fight to recover one or two

dollars. It’s a fight to save my home”. [note: 32] In Ng Eng Ghee (Costs), Mr Darmawan told the courtthat the plaintiffs had been “engaged in a legal battle… in order to prevent their homes from being

force-sold.” [emphasis added]. [note: 33]

133 The point was put to him that the First SC’s breaches of duty had benefited him and the otherplaintiffs because the result of the breaches was not only that they got their unwavering wish tosave their home from being force-sold, but also that they could enjoy the significant capitalappreciation of their homes which resulted from the surging property market from the end of 2006onwards. Mr Darmawan, to his credit, again emphasised that it was never a question of money. Hehad been fighting not to get more money but for him, his wife and family to continue living in their

home: [note: 34]

So if anyone is to ask me, you should be happy because after the setting aside of the collectivesale, the price or the value of your homes all have risen, I would say, yes, but the only benefitto me would be the setting aside of the collective sale allows me to continue living in my home.I managed to save my home from being [force-sold].

But if anyone is going to ask me, “Yeah, so really you make profits, you must be happy that thevalue, the price of your home has gone up”, I would say no, because I have no intention to takeany profit out of my home. I intend to live in this place.

…

… The only benefit out of setting aside of the collective sale is I get to continue living at Horizontowers. This is what I wanted to complete in terms of my answer to your Honour.

[emphasis added in italics and bold italics]

134 I find that in his own words, Mr Darmawan objected to the collective sale because he “was

really afraid of losing [his] home”, [note: 35] and not because the defendants acted in breach of theirfiduciary duties. Mr Darmawan decided to object first and then looked for, and found, reasons orgrounds for that objection later. There is no causal link between the defendants’ breach and thecosts which Mr Darmawan incurred in resisting the Collective Sale Application.

Position of Ms Tan and her husband

135 Ms Tan gave evidence to set out her position and that of her husband on the collective sale.She testified that her intention all along was to fight for her home. She explained her situation thus:[note: 36]

For me, I did not want to sell.

…

It’s because of my own personal situation, as in my family situation, and before we had bought

this place, we had told everyone, okay, you can design your own room and have your own spaceand all that, and to be frank, I have got two stepkids, so it will not be easy to sort of replicatethat same thing elsewhere and we had all settled down in quite a harmonious fashion, so thatwas the reason why we thought, you know, we don’t want to move away, but if the law forcesus, 80 per cent wants to sell, we accepted that we had to move, we’re not going to object withno reasonable basis.

136 The upshot of Ms Tan’s testimony is that her main purpose in objecting to the Collective SaleApplication was to keep her home. The only function of the defendants’ breaches of fiduciary dutieswas to provide her the grounds to mount her objection to the sale and to achieve her main purpose.The First SC’s breaches were not the but-for cause of Mr Then and Ms Tan’s objections.

Position of Ms Sadeli

137 Ms Sadeli gave no evidence. Mr Darmawan sought to give evidence on her behalf. Thecausation inquiry I have to undertake involves an analysis of each plaintiff’s subjective intention. Thatrequires direct, non-hearsay evidence from each plaintiff of their thinking process throughout thecollective sale process and litigation. I have no direct, non-hearsay evidence on which to find that MsSadeli’s decision to incur the costs of objecting to the Collective Sale Application was caused by thedefendants.

138 Even if I were to take Mr Darmawan’s evidence into account in assessing Ms Sadeli’s subjectivestate of mind, that would lead me to the same conclusion for Ms Sadeli as I have found for MrDarmawan and for the same reasons: that she objected to the collective sale because she viewed herhome too as not being for sale and that she found the grounds for her objection in the course ofpursuing the decision to object.

Need to focus on correct causal inquiry

139 It is, of course, true that the plaintiffs could not have succeeded in blocking the collective saleif the First SC had not breached its fiduciary duties. But it does not follow from that that it was theFirst SC’s breach that caused the plaintiffs to incur costs in objecting to the Collective SaleApplication. The correct causal inquiry is whether the plaintiffs would have incurred the costs ofresisting the Collective Sale Application if the First SC had not breached its fiduciary duties. Thecausal enquiry does not ask whether the plaintiffs could have resisted the Collective Sale Applicationif the defendants had not breached their fiduciary duties. Given that the plaintiffs’ primary purposewas, and always had been, to fight for their homes, the answer to the correct causal inquiry is clearlyyes. The evidence as a whole points to the fact that there was no causal link between the loss whichthe plaintiffs allegedly suffered and the defendants’ breach of fiduciary duty. There is no sense inwhich the plaintiffs can claim that, but for the defendants’ breach, they would not have objected tothe Collective Sale Application.

140 Mr Ramesh’s argument to the contrary involves, with no disrespect intended, sleight of hand.Instead of posing the relevant causal question, he posed a different question involving a differentcasual inquiry. This is clear from the plaintiffs’ opening remarks, the following aspect of which was

emphasised during trial: [note: 37]

It is evident that if these breaches had not been committed, the Plaintiffs could not haveobjected to the en bloc application.

[emphasis added]

A:

Q:

A:

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A:

Judicial review application

141 My analysis is fortified by considering OS1057. Tan J’s finding in the judicial review applicationis a useful starting point. Tan J made no order as to costs. On Mr Darmawan’s own evidence, this wasbecause Tan J considered the application an attempt to delay matters past the long stop date for the

collective sale order in the S&P. [note: 38] In other words, Tan J found that the plaintiffs’ judicialreview application was a tactical move designed to forestall the collective sale by ensuring that theS&P expired before the STB could hear and determine the Collective Sale Application.

142 It should be noted that at the time of OS1057, the plaintiffs were unaware of the defendants’failure to disclose the additional purchases and the resulting potential conflict of interest. It does notmake sense, therefore, for the plaintiffs to argue that it was the defendants’ breach of the duty todisclose potential conflicts of interest which caused them to commence OS1057. The causal linkbetween the defendants’ breach of duty and the plaintiffs’ decision to file OS1057 is, at best,tenuous. The plaintiffs say that the defendants initiated it all. They lay the costs for this judicialreview application at the feet of the defendants (see [38] above). But it was the plaintiffs who tookthis step to file the judicial review application: a decision which Tan J held to be tactical.

Novus actus interveniens

143 Even if the plaintiffs had been able to establish some form of causal link between thedefendants’ breach of fiduciary duties and their alleged loss, I find that HPPL’s decision to commenceproceedings claiming $1bn against the consenting subsidiary proprietors and the Third SC’s reaction ofextending the deadline to obtain the STB’s approval broke the chain of causation. All claims forunrecovered costs after August 2007 are not caused by the defendants’ breaches of their fiduciaryduties of care and skill, diligence and prudence.

144 On 11 August 2007, the S&P with HPPL expired with no remaining obligations on the consentingsubsidiary proprietors’ part. The consenting subsidiary proprietors were under no duty to extend theS&P. They could have walked away. The collective sale would have fallen through. There would havebeen no need for the plaintiffs to continue their resistance to the Collective Sale Application. Theywould have incurred no further costs. Mr Darmawan accepted that this was the correct understanding

of the consenting subsidiary proprietors’ obligations under the S&P: [note: 39]

Based on my understanding of the option or the sale purchase agreement [sic], the optionnot to extend or to extend was in the hand of the sellers or, in that case, would be the thirdsales committee.

So they could decide not to extend, am I right?

Yes. And I was hoping they did not extend.

They would decide not to extend?

Yes.

145 As mentioned above at [44], on 23 August 2007, HPPL filed OS1238 seeking $1bn in damagesagainst the consenting subsidiary proprietors. I am satisfied from the evidence of Mr Lim Seng Hoo,the chairman of the Third SC, that the fear of potential liability under that application is the onlyreason the Third SC revived the S&P and extended in HPPL’s favour the deadline to secure acollective sale order. HPPL’s lawsuit and the Third SC’s response were novus actus interveniens. It

could not have been foreseen that HPPL would sue the consenting subsidiary proprietors. It could notbe foreseen that they would claim $1bn in damages. It was this unforeseeable act which weighed oneverybody’s mind and caused the unforeseeable extension of the S&P. Mr Lim explained the

circumstances in which the decision to extend the S&P had been made as follows: [note: 40]

A lot of consenting owners actually on the Raffles – the first meeting at the Holiday Inn Park Viewwere actually standing up, some were like, almost crying saying, “I’m an old person, I’m retiredand I can’t take a suit”, many of them were just quite in despair.

And then they were forming a lot of groups and saying “I’m going to sue you” and “We’re going tosue each other” and the whole thing was chaotic. If you went in for the suit [by HPPL] in suchdisunity, there’s no way we will win because we’re going to sue each other and we wouldprobably be – it’s unprecedented to be sued, but I think we can’t win a court case in that kind ofcircumstances against someone like HPPL.

146 Mr Lim testified that he was aware that there was no legal obligation to give an extension ofthe S&P to HPPL. Rather, he testified that it was “the suit [filed by HPPL] it makes everything

different”. [note: 41]

147 It should be noted that the Third SC consulted their lawyers, Tan Rajah and Cheah LLP(“TRC”), on their obligation to extend the S&P and also on the pending suit filed by HPPL. Ms Siowvoted against the extension of the S&P. She testified that this was because “the contract was

written in such a way that it would have lapsed” [note: 42] and allowing it to lapse instead of

extending it would have been the right thing to do. [note: 43] Ms Siow clearly understood the legalposition in relation to the S&P and was not intimidated by HPPL’s suit. There was no suggestion thatTRC had been remiss in their duties to explain the legal implications of both the HPPL lawsuit and theS&P. The decision to extend the S&P did not flow from the First SC’s decision to sign the S&P or froma misunderstanding about the legal effect of the S&P. HPPL’s claim was a new and independentfactor. Mr Lim agreed that the real cause for the extension was “overall” because of HPPL’s claim. Thecollective sale proceedings had come to a natural end before HPPL’s application was filed. But for thatapplication and the extension it extracted from the Third SC, the collective sale proceedings wouldnot have revived and the plaintiffs’ further costs would not have been incurred. This was novus actusinterveniens.

148 Mr Darmawan must be taken to have accepted this, for this was the very basis of hisapplication to the Court of Appeal in Ng Eng Ghee (Costs) that HPPL be jointly liable for costs. Heargued that the collective sale was over after the S&P expired and after the Second SC had decidednot to extend it. It was Mr Darmawan’s own submission that the S&P had been revived because of

the “threat of lawsuits from the Interveners”. [note: 44] In his further submissions on costs before theCourt of Appeal, Mr Darmawan characterised the proceedings after the 1st STB decision as follows:[note: 45]

A sale that had ended, was revived by the HPPL’s lawsuit. What transpired between the CSPsand HPPL had had the effect of dragging the minority objectors back into the ring.

149 Ms Tan’s submissions before the Court of Appeal seeking costs against HPPL made similar pointsto Mr Darmawan’s. She stated that the majority owners had refused to extend the S&P, and it was“noteworthy that they subsequently exercised the option to extend in September 2007, in the face of

lawsuits from the purchaser”. [note: 46] She also characterised the proceedings as follows: [note: 47]

The “on again, off again” en bloc was due to HPPL’s $1 billion contract action against the majorityowners for breach of contract.

[emphasis in original]

150 It does not now lie in the plaintiffs’ mouths to claim that the filing of HPPL’s application did notcause the revival of the S&P and, in turn, cause the continued collective sale proceedings after 27August 2007.

Fourth issue: can the plaintiffs recover equitable compensation for their unrecovered legalcosts?

151 Even if I am wrong and the plaintiffs could prove causation, I find that the plaintiffs are barred,both as a matter of law and on the facts of this case, from claiming their unrecovered costs from thedefendants as equitable compensation. The plaintiffs argue that they are entitled to recover thesecosts from the defendants because they have an independent cause of action against the defendantsfor breach of fiduciary duty. That is an oversimplification of the law. My analysis of the cases whichfollows at [187] – [257] below shows that an independent cause of action is a necessary, but is nota sufficient, pre-requisite.

152 Before I turn to the cases, however, it is necessary to understand the conceptual andpractical underpinnings of an award of costs under the procedural law.

How the procedural law views costs

The indemnity principle

153 The incidence of costs in civil litigation is governed by the indemnity principle. The indemnityprinciple gives the winning party in civil litigation an indemnity in respect of his costs from the losingparty, subject always to an overriding discretion vested in the court. The indemnity principle istherefore made up of two component rules: (a) a cost-shifting rule; and (b) a quantification rule.

154 The cost-shifting component of the indemnity principle dictates that the costs of civil litigationshould ordinarily follow the event, the “event” being the outcome of the litigation: O 59 r 3(2) of theRules of Court (Cap 322, R5, 2006 Rev Ed). But costs which have been shifted must also bequantified. The quantification component of the indemnity principle dictates that the winner is entitledto recover a sum which indemnifies him for the fees and disbursements he has to pay his ownsolicitors.

Policy factors underlying the indemnity principle

155 The indemnity principle makes the vindicated winner whole for the costs of what he has shown,by the court’s judgment, to be unmeritorious litigation. It therefore serves to compensate the winner,rather than to punish the loser for his original wrongdoing. Exceptionally, the quantification componentof the indemnity principle can be used to punish the loser for his misconduct of the litigation itself: NgEng Ghee (Costs) at [7].

156 In that sense, it could be said that the indemnity principle achieves the same compensatoryfunction as an award of compensation under the substantive law. But while compensation is theimmediate effect of applying the indemnity principle, the ultimate policy of the indemnity principle isrooted not in compensation but in enhancing access to justice. The indemnity principle facilitates a

meritorious litigant’s pursuit of justice by ensuring retrospectively that he attains justice at hisopponent’s expense rather than his own. As the Court of Appeal said in Ng Eng Ghee (Costs) at [1]:

In adjudicating on costs, the court also has to bear in mind that unmerited barriers in the path ofrecovering reasonably incurred costs might well have the chilling effect of deterring parties, infuture, from legitimately pursuing or defending their rights.

157 At the risk of oversimplification, the indemnity principle is the procedural law’s functionalequivalent of legal aid. But this form of legal aid is funded not by the state but by the opposinglitigant; its grant is based not on need but on judicially-established merit; it is granted not as amatter of right, but as a matter of judicial discretion; and it is granted not ex ante, at the outset oflitigation, but ex post, at the conclusion of the litigation.

158 The indemnity principle cannot achieve its policy of enhancing access to justice, however, if itdoes not hold a balance between the interests of the victor against those of the vanquished. All thatthat the vanquished has done is to lose his attempt to vindicate his legal rights. It is not a civil wrongfor a party to lose civil litigation, even if motivated by malice. That remains the general rule inSingapore (Strategic Worldwide Assets Ltd v Sandz Solutions (Singapore) Pte Ltd and others (TanChoon Wee and another, third parties) [2013] SGHC 162 at [93]) and in England (see Gregory vPortsmouth City Council [2000] 1 AC 419 at 432), though no longer in Victoria (Little v Law Instituteof Victoria (No 3) [1990] VR 257) or in the Cayman Islands (Crawford Adjusters and others v SagicorGeneral Insurance (Cayman) Ltd and another [2013] UKPC 17). So the indemnity principle must notonly set a floor on the winner’s entitlement to recover costs, it must also set a ceiling on the loser’sliability to pay costs.

159 In addition to the interests of the victor and the vanquished, the indemnity principle must alsobear in mind the interests of potential litigants. The effect of the indemnity principle is to multiply thecosts at stake in civil litigation by the number of separately-represented litigants involved. Thiscosts-multiplying effect deters potential litigants who are risk averse from pursuing or defending theirrights.

160 The deterrent effect of the indemnity principle arises because it enhances access to justiceonly ex post. The only litigants who can claim its benefits are meritorious litigants who had, at theoutset of the litigation, the resources to take on the worst-case risk of paying multiple sets of costsand the fortitude to carry that risk throughout the litigation. But looked at ex ante, the indemnityprinciple deters potential litigants who are meritorious but who are unwilling or unable to take on thatworst-case risk. The risk-averse litigant is almost always the individual and the impecunious litigant.And so the indemnity principle has the potential to deter these litigants from pursuing or defendingtheir rights. An indemnity principle which has no regard for its deterrent effect therefore risks denyingaccess to justice.

161 To address these risks, procedural law modifies both components of the indemnity principle: (a)in the particular case, to balance the interests of the victor and the vanquished; and (b) across theboard, to mitigate its deterrent effect on the risk-averse and the impecunious.

Mitigation of the cost-shifting component

162 The cost-shifting component is modified by making it not an invariable rule but merely a defaultrule, subject to discretionary displacement if the circumstances of the case warrant it (see theproviso to O 59 r 3(2)). So too, the court has a discretion to take a more granular approach to the“event”. Rather than feeling compelled to make a winner-takes-all order that all the costs of the

entire litigation should follow a single event, the court can make differentiated, issues-based costsorders which reflect which party won or lost on particular issues (see O 59 r 6A). The court is alsoempowered to deprive a successful party who has been guilty of neglect or misconduct of theassociated costs or even order him to pay those costs to the unsuccessful party (see O 59 r 7). It isalso to enhance access to justice that recent amendments in England have abrogated costs shiftingagainst an individual in personal injury cases by introducing qualified one-way costs shifting: see theEnglish Civil Procedure Rules 1998, Parts 44.13 to 44.17 implementing recommendations by Sir RupertJackson and his committee in Review of Civil Litigation Costs: Final Report. There are also proposals toextend qualified one-way costs shifting to other classes of cases to enhance access to justice forthe individual litigant.

The limits on the quantification component

163 Procedural law also modifies the quantification component of the indemnity principle to enhanceaccess to justice. The first limit is that the winner is entitled on taxation not to an actual indemnityfor his costs but to what the procedural law defines to be an indemnity. As the Court of Appeal heldin Ng Eng Ghee (Costs) at [7]:

… the indemnity principle as applied in Singapore rests on one bedrock feature. It only extends tocosts reasonably incurred and not all costs incurred. Therefore, the principle, does not, inpractice, amount to a full and complete indemnity to the successful party against all theexpenses to which he has incurred in relation to the proceedings (see Singapore Civil Procedure2007 at para 59/27/5) unless this has been contractually agreed upon or if the court makes aspecial order in exceptional circumstances.

[emphasis in original]

164 What the procedural law defines to be an indemnity has changed over the years. Theprocedural law now defines an indemnity by applying a double test of reasonableness:

(a) The default quantification rule is the standard basis of taxation (see O 59 r 27(2)). On ataxation of costs on the standard basis, the receiving party recovers a reasonable amount inrespect of all costs reasonably incurred, with any doubts about reasonableness resolved in favourof the paying party.

(b) By way of exception to the default standard basis of taxation is the indemnity basis oftaxation (see O 59 r 27(3)). On a taxation of costs on the indemnity basis, the receiving partyrecovers all costs except those which are unreasonable in amount or those which have beenunreasonably incurred, with any doubts about reasonableness resolved in favour of the receivingparty.

165 Defining the indemnity in this way operates ex post to protect a litigant who conducts thelitigation reasonably but nevertheless loses by limiting his liability for costs to reasonable costs. Theindemnity thus defined also operates ex ante as an assurance to all potential litigants that theirworst-case risk if they lose will be limited to reasonable costs. That mitigates the indemnity principle’sdeterrent effect and enhances access to justice.

The latent limit on the quantification component

166 There is also a latent limit on the quantification component of the indemnity principle whicharises from how the test of reasonableness operates in reality both as between party and party and

as between solicitor and client. The procedural law intends there to be a margin between each of thefollowing: (a) costs taxed on the standard basis; (b) costs taxed on the indemnity basis; and (c)costs which a solicitor is entitled to be paid by his own client (see Gomba Holdings (UK) Ltd vMinories Finance Ltd (No. 2) Ltd (No. 2) [1993] Ch 171 at 188D). Each of these margins exist to avoiddeterring risk-averse litigants and thereby to enhance access to justice.

Party and party costs

167 The phrasing of the standard basis and the indemnity basis has an obvious difference: thestandard basis is phrased positively in terms of reasonableness whereas the indemnity basis isphrased negatively in terms of unreasonableness. The only real difference of substance between thetwo quantification rules is the incidence of the burden of proof. On the standard basis, the burden ofproof is on the receiving party and so doubts are resolved against recovery. On the indemnity basis,the burden of proof is on the paying party and so doubts are resolved in favour of recovery. But therewill almost always be sufficient evidence before the court for it to form a positive view as to whethera particular item of costs was or was not reasonably incurred or is or is not reasonable in amount. Soa court taxing costs will not in the usual case have to rely on the incidence of the burden of proof todecide the recoverability of a particular item of costs, whether on principle or on quantum.

168 Despite that, the difference in wording between the standard and the indemnity basis signalsan intended difference in outcome between the two bases of taxation. If that were not so, therewould be no need for two bases. The result is that as a norm rather than as an exception, thequantification rules are applied to as to maintain an appreciable margin between the two bases. Iconsider the explanation for this at [172] below, after dealing with solicitor and client costs.

Solicitor and own client costs

169 The indemnity principle compensates a winner for the fees and disbursements which he has topay his own solicitor. A solicitor’s entitlement to recover from his client fees and disbursements forwork done arises in the first instance from his contract of retainer with his client but is ultimatelyunder the control of the court through its jurisdiction to tax a solicitor’s bill to his own client.

170 The court taxes costs as between a solicitor and his own client on the indemnity basis (see O59 r 28(2)), supplemented by three presumptions. The first two presumptions are that an item ofcosts is presumed to have been reasonably incurred or to be reasonable in amount if the clientexpressly or impliedly approved either the incurring of that item of costs or its quantum (see O 59 r28(2)(a) and (b)). The third presumption is that an item which is “of an unusual nature” is presumedto be unreasonable unless the solicitor advised the client that that item may not be recoverable on ataxation between the parties (see O 59 r 28(2)(c)).

171 Again, the existence of these presumptions signals that a difference is intended between theresult of assessing costs on the indemnity basis and assessing costs on the solicitor and own clientbasis. But that means that a winner who secures an exceptional order for costs on the indemnitybasis will not be made whole for all the reasonable costs which he has to pay his own solicitor. Thereis in reality and as a norm a small but appreciable margin between the quantum of costs which a loserhas to pay a winner assessed on the indemnity basis and the costs which the winning party has topay his own solicitor.

Unrecovered costs is the result of mitigating the indemnity principle

172 The result of all this is that although the indemnity principle dictates –as its name suggests –

that a successful party in litigation is entitled to recover through an award of costs a sum which is anactual indemnity for the costs he has incurred (or at least for the costs he has reasonably incurred),the procedural law does not define a single indemnity. Instead, it quantifies the indemnity on acalibrated three-point scale. Where on that scale a particular case falls depends on the court’sdiscretion, exercised judicially. The first point on the scale is costs on the standard basis: this is thenorm and permits the winner to recover most of his own costs from the loser. The second point onthe scale is costs on the indemnity basis: this permits the winner to recover more costs from theloser than on the standard basis, but still almost always not an actual indemnity. The third point iswhat the solicitor is entitled to receive from his own client. The latter basis of recovery is available asbetween party and party only if the parties have agreed to it by contract.

173 Having created this calibrated three-point scale, the procedural law sets the default asbetween party and party at the lowest point on the scale. This is, in effect, telling potential litigantsex ante that if they lose the litigation, their liability for costs will not be multiplied by the number ofparties involved. So a litigant involved in the paradigm two-party litigation will know that his maximumexposure for costs in the worst-case is not 200% but something less than that – perhaps 170%. Thatmargin of 30 percentage-points is intended to reduce the deterrent effect on the potential litigant.The by-product of this mitigation is that a successful litigant is almost always out of pocket for anappreciable part of his costs.

174 These unrecovered costs therefore exist as a norm, rather than as an exception, to hold thebalance between the interests of: (1) litigants who are able and willing ex ante to take on the worst-case risk of having to pay multiple sets of costs and who go on to win; (2) litigants who take on thatrisk and lose; and (3) potential litigants who might be deterred entirely from litigating by the prospectof cost-multiplication. And this policy is a policy only of the procedural law; it is no part of the policyof the substantive law that governs their dispute.

175 The existence of these unrecovered margins as a norm does not mean that the principles ofcosts quantification are routinely being flouted, ignored or misapplied. Nor does it mean that clientsare routinely behaving irrationally or abusively by agreeing to incur unreasonable costs. Nor does itmean that solicitors are routinely overcharging their own clients. It simply means that reasonableness,quite understandably, is taken to mean different things in different contexts; all in order to advancethe procedural law’s policy of enhancing access to justice for all. What the procedural law considersreasonable on the exceptional indemnity-basis taxation is not necessarily what it considers reasonableon the default standard-basis taxation or what it considers reasonable for a client to pay his ownsolicitor.

176 But merely imposing these limits on the loser’s liability to pay costs is not in itself sufficient toadvance the procedural law’s policy of enhancing access to justice. To advance this policy,procedural law must – and therefore does – go further and by a fiction deem an award of costs madeas between party and party on the indemnity principle to be an actual indemnity for the winner, eventhough in virtually every case, it is not. I explain in the next section why this must be so.

Substantive law and the procedural law intersect

177 Costs incurred in litigation to vindicate one’s rights can be analysed as recoverable both: (a) inthat litigation itself, under the procedural law as a by-product of that litigation; and (b) by separateaction, under the substantive law as part of the compensation for the underlying wrong. This sets upa tension. As I have shown above, the policy of the procedural law in awarding and quantifying costsis to enhance access to justice for actual and potential litigants. To do that, it limits the losingparty’s liability to pay costs. By contrast, the policy of the substantive law in awarding compensation

for a civil wrong is to make whole the victim of the wrong. When a party who has incurred costs inlitigation subsequently commences separate litigation to try to recover damages under thesubstantive law for all or part of those costs, the policy of the procedural law and of the substantivelaw compete. To balance these competing policies, a claim to recover compensation forcosts incurredin previous proceedings is governed by special rules.

178 In addition to the overarching procedural policy of enhancing access to justice, there are twosubordinate policies of the procedural law which underpin the special rules which apply under thesubstantive law to a claim to recover costs as damages. I consider these subordinate policies nextbefore I turn to the case law.

Achieving finality in litigation

179 It is contrary to the procedural objective of achieving finality in litigation to permit a party whohas secured an award of costs under the procedural law as a by-product of earlier litigation later toinvite a court to consider anew under the substantive law the very same question. This is astraightforward application of the principles which underlie issue estoppel (see above at [95] to [98])or res judicata.

180 It could be said, of course, that the later court considering the plaintiff’s claim forcompensation under the substantive law is not concerned with the same question which the earliercourt considered when awarding costs under the procedural law. The later court is now consideringthe recoverability of compensation for a civil wrong on the usual principles of breach, causation,foreseeability, remoteness and mitigation. The earlier court considered the award and quantification ofcosts on the indemnity principle with all its patent and latent limits.

181 At one level of generality, that is undoubtedly true. But at a fundamental level, both courts arein fact considering the very same question: how should the law compensate the plaintiff for the costsincurred in the earlier litigation. The fiction of the procedural law deems that the award of costs to bean actual indemnity. The question for the substantive law in the later action, then, is whether itshould accept that fiction or inquire into that fundamental question afresh

182 The procedural policy of achieving finality in litigation is engaged only because of theprocedural law’s fiction that its award of costs is an actual indemnity for the costs incurred in theearlier proceedings. Finality is therefore not an independent policy which shapes either the rule aboutrecovering costs as damages or the exceptions to that rule. But the cases do recognise it as asubsidiary policy engaged in a claim of this nature.

Suppressing parasitic litigation

183 Another policy of procedural law which is engaged in a claim for costs as damages is the policyof suppressing parasitic litigation. The resources of the civil justice system are finite. They should beconserved and directed only towards litigating substantive claims over substantive rights. Parasiticlitigation is not litigation about substantive rights and is nothing more than litigation about litigation. Aclaim to recover costs as damages is therefore parasitic litigation which this policy suggests ought tobe suppressed. Although there is separate recognition in the cases of this policy, the cases againsuggest that it is a subordinate policy which is not always determinative.

Cases in England and Singapore

184 I now examine the case law to see what happens when the policy of the substantive law in

making whole the victim of a wrong intersects with the policy of the procedural law of enhancingaccess to justice and the subordinate policies of achieving finality in litigation and of suppressingparasitic litigation.

185 I have shown that the civil procedural law limits a losing party’s liability for costs to the resultyielded by applying the indemnity principle – subject to its patent and latent limits and subject tojudicial discretion – and goes on to deem that result, by a fiction, to be an actual indemnity. Ananalysis of the cases shows that the substantive law has developed the following special rules toavoid undermining the procedural law and its policies:

(a) The substantive law will not award compensation for costs incurred in prior litigationunless:

(i) The court in the prior litigation did not make an order under the procedural law for thecosts of that litigation as a by-product of that litigation and the party now seeking torecover compensation for those costs had no reasonable opportunity to seek such an order;or

(ii) The court in the prior litigation did make an order under the procedural law for thecosts of that litigation as a by-product of that litigation but the costs so awarded were notawarded under the indemnity principle as an actual indemnity.

(b) Where the court awards compensation for costs under one of the two exceptions above:

(i) If the prior litigation was before a court of the same forum:

(A) those costs will be limited to costs as quantified under the procedural law’sdefault quantification rule, as it stands from time to time; and

(B) those costs will be quantified by the procedure of taxation rather than by anassessment of damages.

(ii) If the prior litigation was before a foreign court, the above limitations will notnecessarily apply.

I have used the neutral term “compensation” in my synthesis of these special rules because theserules apply to a claim for costs as damages as well as to a claim for costs as equitable compensation.Equity follows the law.

186 For ease of exposition, I will go through the cases chronologically: each case is best seen inlight of the cases which preceded it.

The Quartz Hill Consolidated Gold Mining Company v Eyre

187 The Quartz Hill Consolidated Gold Mining Company v Eyre (1883) LR 11 QBD 674 (“Quartz Hill”)illustrates the general rule which bars the recovery of costs as damages.

188 In Quartz Hill, the defendant presented a winding up petition against the plaintiff. Thedefendant advertised the petition in a number of newspapers. But because of superveningcircumstances, he did not serve the petition on the plaintiff. He even gave the plaintiff notice beforethe hearing of his intention to withdraw the petition. The plaintiff nevertheless instructed solicitorswho appeared on the petition. A Vice-Chancellor dismissed the defendant’s petition. The plaintiff

applied for an order for its costs of opposing the petition. The Vice-Chancellor rejected theapplication. At that time, English procedural law provided that a losing party in civil litigation wouldordinarily pay to the winning party only those costs which the winning party had necessarily incurredin attaining justice. That is, of course, different from our procedural law (see [164] above) underwhich the touchstone is not necessity but reasonableness. So it appears that the Vice-Chancellortook the view, on the facts before him, that the plaintiff had incurred unnecessary costs.

189 The plaintiff then brought a separate action against the defendant, claiming damages formalicious prosecution in presenting the failed winding up petition. It is not an actionable wrong toprosecute civil litigation maliciously unless the plaintiff has suffered special damage of one of thethree kinds recognised by Holt CJ in Savile v Roberts (1698) 91 ER 1147. The only special damage theplaintiff claimed and proved at trial was the costs it had incurred in defending the petition. The trialjudge held that the plaintiff could not rely on these costs as special damage because the Vice-Chancellor had, in the earlier litigation, refused to award the plaintiff those very costs. An essentialelement of the plaintiff’s cause of action – special damage – was missing. The plaintiff was thereforenonsuited at trial.

190 The plaintiff appealed to the Court of Appeal. Brett MR and Bowen LJ (as they both then were)in a two-judge coram agreed with the trial judge that the plaintiff’s extra costs could not constitutespecial damage under the substantive law. Brett MR rested his decision on the fiction of theprocedural law which deems an award of costs under the indemnity principle to be an actualindemnity. If those costs were irrecoverable under the applicable procedural law because they wereunnecessary, so too they were irrecoverable under the substantive law because they were caused bythe plaintiff’s decision to incur unnecessary costs and not by the defendant’s malicious prosecution.The unrecovered costs therefore could not constitute the essential element of special damage in anaction for malicious prosecution. Brett MR said (at 682):

The theory of extra costs is that they are not necessary to the purposes of the party who hasincurred them. When the costs are taxed as against the losing party in the litigation, he is boundto pay only what are called technically “the costs between party and party;” and the successfulparty is left to pay what are called technically “the extra costs”. The theory is that the costswhich the losing party is bound to pay, are all that were necessarily incurred by the successfulparty in the litigation, and that it is right to compel him to pay those costs because they havebeen caused by his unjust litigation; but that those which are called “extra costs,” not beingnecessarily incurred by the successful party in order to maintain his case, are not incurred byreason of the unjust litigation. It may be quite reasonable as between the successful party andhis solicitor that the “extra costs” should be paid to that solicitor; but it is unreasonable that thelosing party should pay them, they not having been caused by his litigation. If this be taken to bethe reason why “extra costs” are not allowed upon taxation, it is obviously immaterial whether ornot the litigation was false and malicious and without reasonable or probable cause; the “extracosts” are not damage caused by the unjust litigation, and therefore they are not damage forwhich an action will lie.

191 Bowen LJ agreed with Brett MR that unrecovered costs cannot constitute the necessaryspecial damage as defined by Holt CJ in Savile v Roberts. But Bowen LJ did not rely on the particularphrasing of the procedural rule which then governed recovery of costs. He rested his decision on amore general proposition: it is for the court hearing the original litigation – and only that court – todetermine the winner’s proper entitlement to the costs of the earlier litigation and to award thosecosts under the procedural law. So Bowen LJ said (at 690):

The bringing of an ordinary action does not as a natural or necessary consequence involve any

injury to a man's property, for this reason, that the only costs which the law recognises, and forwhich it will compensate him, are the costs properly incurred in the action itself. For those thesuccessful defendant will have been already compensated, so far as the law chooses tocompensate him. If the judge refuses to give him costs, it is because he does not deserve them:if he deserves them, he will get them in the original action: if he does not deserve them, heought not to get them in a subsequent action.

192 The plaintiff’s claim for his unrecovered costs therefore failed. Despite this, the plaintiff secureda new trial. That was only because the Court of Appeal found the essential element of special damageelsewhere. It held that the allegations in the defendant’s winding up petition had damaged theplaintiff’s “fair fame and credit”, thereby supplying a type of special damage recognised in Savile vRoberts as sufficient to support a claim for malicious prosecution.

193 The plaintiff in Quartz Hill had a cause of action in malicious prosecution against the defendant.That cause of action was independent of the earlier winding up proceedings. But that was notsufficient to sustain the plaintiff’s claim to recover the costs of the winding up proceedings asdamages. That claim failed entirely. It came within neither exception to the general rule barringrecovery (see [185(a)] above). Indeed, the plaintiff’s entire claim would have failed but for the courtidentifying other special damage on which it could be founded.

Berry v British Transport Commission

194 Does it make a difference if a plaintiff seeks to recover costs incurred in earlier criminalproceedings rather than civil proceedings? The English Court of Appeal considered that question inBerry v British Transport Commission [1962] 1 QB 306 (“Berry”). The plaintiff was convicted at trialof a minor criminal offence but was acquitted on appeal. The criminal appeal court, on the plaintiff’sapplication, ordered the prosecutor to pay her 15 guineas as costs. She then commenced civilproceedings against her prosecutor claiming damages of £64 2s in the tort of malicious prosecution.That sum was the actual costs she incurred in defending the criminal prosecution less the 15 guineasalready awarded to her. The question for the English Court of Appeal was whether, in light of QuartzHill, these extra costs were capable of constituting the special damage essential for an action inmalicious prosecution.

195 Devlin LJ (as he then was) gave the leading judgment. He began (at 319) by setting out therule:

… The defendants allege that this sum of £64 2s. is not recoverable because it is too remote inlaw.

This allegation is based on an old rule which is stated in Mayne on Damages, 11th ed. (1946), p.119, in the following terms: "It was regarded as a general principle that the right to costs mustalways be considered as finally settled in the court where the question to which that right wasaccessory was determined; so that, if any costs were awarded, nothing beyond the sum taxedaccording to the rules of the court could be recovered; or if costs were expressly withheld in theparticular case, none would be recoverable by suit in any other court." This principle is part ofthe substantive law of damage and is not specifically related to actions for malicious prosecution.

196 Devlin LJ (at 319) identified the policy of achieving finality in litigation as the policy underlyingthe rule. He said (at 320):

The reason for the rule is not that the costs incurred in excess of the party and party allowance

are deemed to be unreasonable; it is that what is presumed to be the same question cannot begone into twice. The rule appears to have been first laid down by Mansfield CJ in Hathaway vBarrow where he put it on the ground that “it would be incongruous to allow a person one sum ascosts in one court, and a different sum for the same costs in another court.” If in the earlier casethere has been no adjudication upon costs (as distinct from an adjudication that there shall be noorder as to costs), a party may recover all his costs assessed on the reasonable, and not on thenecessary, basis. If a party has failed to apply for costs which he could have got if he had askedfor them, a subsequent claim for damages may be defeated; but that would be because in such acase his loss would be held to be due to his own fault or omission.

197 Devlin LJ acknowledged that the two courts were actually considering two different questions:the procedural law (then) applied the test of necessity when awarding costs whereas the substantivelaw, broadly speaking, applied the test of reasonableness when awarding damages. Thus, the policyof achieving finality in litigation was engaged only because of the procedural law’s fiction that anaward of costs is a deemed indemnity, regardless of precisely how the procedural law quantifies theaward and regardless of the margin between actual and recovered costs. But Devlin LJ justified thisfiction on the basis of the procedural law’s policy that it is in the public interest to limit a loser’sliability for a winner’s costs in civil litigation in order to protect all those who have resort to the law.Thus, he said (at 322):

… [T]he reason for the rule is that the law cannot permit a double adjudication upon the samepoint. It would be a rational rule and in accordance with the ordinary principle as to res judicataif in truth it were the same point. But it is not. It may be that when the rule was first laid downby Mansfield C.J. in 1807 the two standards of assessment were not so far apart as they arenow. By 1844 the distinction had begun to appear in practice if not in theory. In Doe v. FilliterPollock C.B. said: "The taxed costs are a fair indemnity; and if they are not so, the rules whichgovern taxation ought to be altered." Alderson B. said: "The taxed costs are intended to be a fullindemnity to the plaintiff for his expenses in getting back the land. That is the principle; whetherit be fully carried out in practice is another matter. ... If the taxed costs are not a full indemnity,they ought to be made so." But this advice has not been taken and the rules which governtaxation have not been altered. In 1869 Blackburn J. in Wren v. Weild said that it was "artificial"to say that the party aggrieved had an adequate remedy in his judgment for costs. In Barnett v.Eccles Corporation Bigham J. said: "The law does not recognise the difference between thesum which it gives as costs, that is, costs taxed as between party and party, and thelarger sum which in practice a litigant has to pay."

I find it difficult to see why the law should not now recognise one standard of costs as betweenlitigants and another when those costs form a legitimate item of damage in a separate cause ofaction flowing from a different and additional wrong. Limitation of liability is a principle that is nowwell recognised. In the case of damage done by a ship it has been in force for the last twocenturies in this country, and for longer in others, and the basis of it is simply that it is not in thepublic interest that shipowners should be deterred from seafaring by the prospect that they mightbe crippled by awards of heavy damages. The stringent standards that prevail in a taxationof party and party costs can be justified on the same sort of ground; see, for example,Smith v. Buller, per Malins V.-C. It helps to keep down extravagance in litigation and thatis a benefit to all those who have to resort to the law . But the last person who ought to beable to share in that benefit is the man who ex hypothesi is abusing the legal process for his ownmalicious ends. In cases of malicious process Mansfield C.J.'s rule has not always been applied.Lord Ellenborough refused to apply it in 1816 and Lord Abinger in 1838 (Sandback v. Thomas andGould v. Barratt. But the other view has prevailed, though Tindal C.J. indicated in Grace v.Morgan that his opinion might have been different if the matter was res integra.

If the matter were res integra, I should for myself prefer to see the abandonment of thefiction that taxed costs are the same as costs reasonably incurred and its replacement bya statement of principle that the law for reasons which it considers to be in the publicinterest requires a litigant to exercise a greater austerity than it exacts in the ordinaryway, and which it will not relax unless the litigant can show some additional ground forreimbursement over and above the bare fact that he has been successful . Without arestatement of that sort, there is undoubtedly a practical need for the rule [in Quartz Hill] in civilcases. Otherwise, every successful plaintiff might bring a second action against the samedefendant in order to recover from him as damages resulting from his original wrongdoingthe costs he had failed to obtain on taxation ; this was unsuccessfully attempted by theplaintiff in Cockburn. v. Edwards. Or as Lord Tenterden C.J. said in Loton v. Devereux: "actionswould frequently be brought for costs after the court had refused to allow them." The rule isthus essential to the administration of justice in civil suits and will continue to be so untilthe time comes, if it ever does, when the law either allows to a successful litigant all thecosts he has reasonably incurred or recognises openly that an assessment of damage anda taxation of costs as between party and party are two different things .

[emphasis added in bold italics]

198 The concluding paragraph from this passage is important: so long as the civil procedural lawcontinues on grounds of policy to award less than an actual indemnity for the winner’s costs, it mustcontinue to deem that award to be an actual indemnity, thereby barring, on grounds of finality, thewinner from claiming damages for his unrecovered costs in subsequent civil proceedings. Otherwise,the resources of the civil justice system would be wasted by an infinite succession of parasiticlitigation to recover damages for costs, all based on the loser’s original wrongdoing.

199 All of this was obiter dicta because Devlin LJ was considering in Berry extra costs arising fromprior criminal proceedings, not prior civil proceedings. On the facts of Berry, Devlin LJ concluded thatrecognising the plaintiff’s claim for the unrecovered costs did not undermine any policy of the criminalprocedural law. A criminal court awarding costs had a discretion at large which was not required to beexercised judicially in accordance with the indemnity principle. The criminal appeal court’s earlieraward of 15 guineas was therefore not awarded as an indemnity for the plaintiff’s actual costs. Thefiction of the civil procedural law – that awarded costs are deemed to be an actual indemnity – wastherefore not needed in the criminal procedural law and not part of it. So there was no bar to aplaintiff claiming her unrecovered costs arising from prior criminal litigation in subsequent civillitigation, provided of course that she had a civil cause of action.

200 The exception to the general rule which Berry recognised and applied is clearly correct. Thereis no need in the criminal procedural law for any fiction that the earlier criminal proceedings and thelater civil proceedings are considering the same question on costs in order to advance a policy ofenhancing access to justice. Although Berry arose from a private prosecution, the typical criminalprosecution is a public prosecution and the typical criminal prosecutor therefore has a public duty toprosecute. If he does so in good faith, his public duty does not allow him to be deterred ex ante bythe possibility of having to pay an actual indemnity to a criminal accused if his prosecution fails. Andif a prosecutor – whether public or private – prosecutes maliciously, he ought to be deterred ex anteby that possibility. There is also no risk of uncontrolled successive parasitic litigation: no civil actioncan ensue without a viable cause of action under the civil law.

201 In Berry, as in Quartz Hill, the plaintiff’s separate cause of action was a necessary but not asufficient condition to sustain her claim. The plaintiff’s action would have failed if the criminalprocedural law had applied the indemnity principle applied in awarding her costs. Her claim succeeded

only because Devlin LJ held that costs were awarded in criminal procedure on different principles fromthose which applied in civil procedure. The case therefore came within the exception at [185(a)(ii)]above.

Ganesan Carlose & Partners v Lee Siew Chun

202 One of the few Singapore case to have considered the recoverability of costs as damages isthe decision of the Court of Appeal in Ganesan Carlose & Partners v Lee Siew Chun [1995] 1 SLR(R)358 (“Ganesan Carlose”). In that case, a son tricked his mother into mortgaging the family home tosecure his company’s indebtedness to a bank. The law firm which acted for her son’s companyfacilitated the deceit through its negligence. The mother later discovered the deceit and sought toset aside the mortgage. She therefore sued, in a single action, her son’s company, the bank and thelaw firm.

203 The mother’s claim against the company ended with judgment in default of appearance. Herclaim against the bank and the law firm went to trial. At trial, the judge dismissed her claim againstthe bank with costs. But he allowed her claim against the law firm in part. He ordered the law firm topay damages to her equivalent to 50% of the losses arising from her son’s deceit. He expresslyincluded in these losses the party and party costs which the mother would have to pay to the bankfor her failed claim against the bank. But he made no order as to the mother’s own costs of hersuccessful claim against the company or of her unsuccessful claim against the bank. He did, however,grant the parties express liberty to apply.

204 In the assessment of the damages payable by the law firm, the mother nevertheless sought torecover – as damages – her own costs of the claims against the company and the bank. Both theAssistant Registrar and, on appeal, the judge in chambers allowed the mother’s claim. The Court ofAppeal held that the mother could not recover her own costs as damages from the law firm. Themother and the law firm were parties to the same proceedings. The mother’s only opportunity torecover her own costs from the law firm was through the trial judge’s costs orders at the end of theliability phase. But the trial judge had made no order as to the mother’s own costs. And the mothertook no steps – even after the judge had determined liability – to invite him to make an order for herown costs under the provision for liberty to apply.

205 As Chao J (as he then was) said (at [16]):

… we do not think it is open to the [mother] to reopen the question and claim as damages thatpart of costs which has not been expressly allowed by the court. And if the [mother] should thinkthat there was something amiss in the order made by the trial judge she should have resorted tothe liberty to apply clause. Having failed to do that, the [mother] cannot lump those costs undera general order for damages. Costs as between parties to the action is always a matter for thediscretion of the court: O 59 rr 2(2) and 3 of the Rules of the Supreme Court.

206 Chao J’s reasoning echoes the reasoning of Bowen LJ in Quartz Hill (see [191] above). Bothjudges expressed their reasons in terms which are independent of the precise quantification testwhich the procedural law applies: whether it is based on necessity or on reasonableness. Theimportant fact for both judges was that the civil procedural law gives a civil court a specific discretionas to costs to be exercised judicially on specific criteria at a specific point in civil proceedings. Thatdiscretion encompasses both aspects of the indemnity principle: which party is liable to pay costs aswell as upon which basis those costs are to be quantified. If the court makes no determination oncosts at the appropriate time – either as a result of a considered decision not to do so or because aparty failed to invite it to do so – that opportunity offered by the procedural law has been missed.

The substantive law will not allow the issue of costs to be reopened at a later date in the guise of aclaim for damages.

207 Ganesan Carlose is authority binding on me for the following proposition: a party who succeedsagainst another party in the liability phase in an action must – at that time – secure an order for allsuch costs which are then within the court’s power under the procedural law and cannot claim thosecosts under the substantive law in the assessment of damages phase in the same action. The factthat the decision in Ganesan Carlose involved a later phase in the same action rather than in aseparate and later action is immaterial. The principle in Ganesan Carlose must a fortiori bar a plaintiff’sclaim in a separate action for costs as damages.

Same-party cases and third-party cases

208 If we assume an action today by P against D in which P claims compensation for all or theunrecovered residue of P’s own costs which P incurred in earlier litigation, there are two possibilities.D may have been a party to the earlier litigation or D may not have been a party to the earlierlitigation. For convenience, I will call the configuration where D was a party to the earlier proceedingsa “same-party” case. I will call the configuration where D was not a party to the earlier litigation a“third-party” case. Quartz Hill and Berry were same-party cases. Ganesan Carlose can be analysed asa same-party case even though the issue about the recoverability of costs as damages arose insuccessive phases of a single action rather than in successive actions.

209 The orthodox position until recently has been that, although P generally cannot recover costsincurred in earlier litigation as damages in a same-party case, he can recover such costs as damagesin a third-party case. The argument for these quite opposite results runs along the lines set out in[210] to [212] below. I will set those arguments out first before explaining why the distinctionbetween a same-party case and a third-party case is too fragile and unprincipled to support thisview.

210 It could be said that the recovery of costs as damages is barred in the same party case for thefollowing reasons. In the typical same-party case, all the relevant policies of the procedural law areengaged and so the procedural law must prevail over the substantive law’s aim of making whole thevictim of a wrong. The procedural law’s policy of enhancing access to justice is engaged. P and Dhave litigated their dispute to a conclusion. D lost and was ordered to pay P’s costs as a by-productof the earlier litigation under the cost-shifting component of the indemnity principle. The court alsoexercised its discretion as to how those costs should be quantified – as standard costs or indemnitycosts. That quantification is subject to all of the procedural law’s patent and latent limits imposed toenhance access to justice for all. The procedural law deemed that award – whether on the standardbasis or on the indemnity basis – to have indemnified the plaintiff. This is so even if it did not amountto an actual indemnity, as is virtually always the case. The policy of achieving finality in litigation isalso engaged, both on the merits and on the issue of costs. On the merits, P has no cause of actionagainst D merely because D lost the earlier litigation. That is so even if D was motivated by malice(see [158] above). If P was the plaintiff in the earlier litigation, P’s claim against D in the later actionfor the costs of the earlier action as damages must therefore, of necessity, be founded again on D’soriginal wrongdoing. But that original wrongdoing was already litigated to a conclusion in the earlieraction. If P was the defendant in the earlier action, his position in the new action is even worse: hedoes not even have the original wrongdoing on which to found his second claim for costs and so, inthe typical case, has no cause of action against D at all. On the issue of costs, too the policy ofachieving finality in litigation is engaged. The earlier court’s award of costs is deemed by a fiction ofthe procedural law to have actually indemnified P. P cannot in the second action ask the court to gobehind that deemed indemnity and determine all over again whether P was in fact indemnified by that

award. And the new litigation – being only about costs – is on its face parasitic.

211 The foregoing analysis assumes that P sought and secured an award of costs in the earlierlitigation. But the result must be the same if P had an opportunity to but failed to seek an order forcosts in the first action, whether that failure was deliberate, careless or otherwise. P cannot bebetter off by declining to ask for an award of costs and instead commencing a separate action forcosts. In a same-party case, therefore, the substantive law’s objective of making the victim whole isopposed by the objectives of the procedural law. The general rule thus dictated in a same-party casebars recovery of costs as damages.

212 It could likewise be said that the recovery of costs as damages in the typical third-party caseis permitted because none of the relevant policies of the procedural law are engaged. In thosecircumstances, the procedural law must give way to the substantive law’s aim of awarding fullcompensation. P and D are litigating against each other for the first time. P’s case against D musttherefore, of necessity, be based on a wrong which arises independently of the earlier litigation:otherwise, it would fail in limine. D will be held liable to pay the costs of the earlier action ascompensation only if he is found to be a wrongdoer, for the first time in the new action. An award ofcompensation will not undermine finality. D was not before the earlier court. P had no opportunity toinvite the earlier court to consider D’s liability under the procedural law to pay the costs of the earlierlitigation. D is therefore not entitled to the benefit of any finality arising from the procedural law’spolicy-based limitation on liability for costs. Looking at D’s particular position, D is adequatelyprotected against P incurring excessive costs in the prior litigation by two things: (a) the substantivelaw’s principles of causation, foreseeability, remoteness and mitigation when assessing compensation;and (b) the fact that in the earlier litigation, P had no assurance of securing subsequentreimbursement by D and so would ordinarily be expected to have limited his expenditure in thoseproceedings in his own rational self-interest. In a third-party case, therefore, the substantive law’sobjective of full compensation is typically unopposed by any objective of the procedural law. Thegeneral rule thus dictated in a third-party case favours recovery of costs as damages.

213 The next case I consider is a third-party case which exposes why this analysis – based as it ison a distinction between the same-party case and a third-party case – is conceptually flawed.

British Racing Drivers’ Club Ltd v Hextall Erskine & Co (a Firm)

214 In British Racing Drivers’ Club Ltd & Anor v Hextall Erskine & Co (a Firm) [1996] BCC 727(“British Racing”), Carnwath J (as he then was) had to consider the rule permitting a party to recovercosts as damages in a third-party case.

215 By the time of British Racing, the touchstone for the recoverability of costs under Englishprocedural law was no longer necessity but was in all cases reasonableness. The change waseffected by amendments to the English Rules of the Supreme Court (“the RSC”) in 1986 whichestablished the then-new standard basis and indemnity basis of taxation for costs payable asbetween party and party. Two new rules were inserted to give effect to this change: O 62 r 12(1)and r 12(2) of the RSC. Our O 59 r 27(2) and r 27(3) are taken virtually verbatim from these tworules. These 1986 amendments also introduced a new test for the recovery of costs as betweensolicitor and own client in O 62 r 15 of the RSC. Our O 59 r 28 is taken virtually verbatim from thisrule. The question for Carnwath J in British Racing was whether these changes to English procedurallaw made any difference to the rule permitting recovery of costs as damages in third party cases.

216 The facts of British Racing were as follows. A law firm gave negligent advice to a racing club.To mitigate the loss caused by that negligent advice, the club had to commence litigation against

certain defendants. The law firm was not one of those defendants. That litigation was eventuallysettled on terms which included the club bearing its own costs. The club then commenced actionagainst the law firm seeking to recover losses it had suffered by reason of the law firm’s negligence.Those losses included the costs the club had incurred in the earlier litigation.

217 The law firm’s negligence was obvious and it virtually admitted liability. So the only real issuefor Carnwath J on the club’s claim to recover its costs as damages was how to quantify the damages.Neither the club nor the law firm argued that the quantification should take place by the usualassessment of damages. The club’s position was that it had proved the costs of the earlier litigationat trial. The defendant had not adduced any contrary evidence to show that those costs wereunreasonable. The club therefore submitted that no quantification was needed and that the law firmshould simply reimburse it in full for those costs. The club’s alternative position was that the damagesshould be quantified by taxation of those costs on the indemnity basis. The law firm on the otherhand, argued simply that those costs should be taxed on the standard basis.

218 Carnwath J took as his starting point the rule which applied in a same-party case. He cited(British Racing at 748) from Lonrho plc v Fayed (No 5) [1994] 1 All ER 188 (“Lonrho”) “the establishedprinciple that a party cannot recover, in a separate action, costs which he could have but was notawarded at the trial of a civil action, or the difference between the costs he recovers from the otherparty and those he has to pay his own solicitor.” Simply put, if the plaintiff did not seek or obtain anaward of costs under the procedural law in the earlier litigation, he is precluded by the policy ofachieving finality in litigation from re-opening that issue in separate proceedings. If he did seek andsecure an award of costs under the procedural law in the earlier litigation, then the procedural law’sassessment of his entitlement to costs is the limit under the substantive law of his entitlement tocompensation for that loss.

219 Carnwath J acknowledged that the orthodox view permitted the plaintiff in a third-party caseto recover in full the costs incurred in an earlier action by way of a separate action against a personwho was not a party to that action, subject only to the usual limitations of the substantive law onthe recovery of damages. But Carnwath J considered it anomalous that a plaintiff in a third-partycase should be treated differently from a plaintiff in a same-party case. Thus, he said (at 749):

... litigation costs have traditionally been subject to special rules for policy reasons. Prior to thechange in the taxation rules [in England in 1986], there was an established distinction betweensuch costs incurred in proceedings between the same parties, and those incurred in proceedingsagainst third parties. This was anomalous, given that similar policy considerations applied in eachcase. The most recent cases show that the position must be re-considered in the light of thechanges to the taxation rules. This enables the anomaly to be resolved. Under the newdispensation, taxation on the standard basis is to be regarded as the equivalent to the solicitorand client basis referred to by McGregor [on Damages].

220 Carnwath J’s decision in British Racing removed the distinction between the third-party caseand the same-party case and applied the same rule to both. The result of Carnwath J’s newapproach, of course, is not to bar the plaintiff in a third-party case entirely from recovering the costsincurred in the earlier litigation as damages. It would be unjust to deprive the plaintiff in a third-partycase of compensation entirely when the plaintiff had no earlier opportunity under the procedural lawto establish this defendant’s liability to pay costs to the plaintiff. But the result of his new approach isthat the measure of the plaintiff’s damages is subject to the limits of the procedural law just as in asame-party case. Further, that measure must be the procedural law’s default measure. The court’sdiscretion under the procedural law to choose between standard costs and indemnity costs does notturn on the gravity of the paying party’s wrongdoing. Rather, it turns on the conduct of the paying

party in the litigation for which it is awarding costs. Since the defendant was not a party to theearlier litigation, there is no conduct of his in that earlier litigation which can form a basis to departfrom the procedural law’s default measure when quantifying the costs of the earlier proceedings. Theresult under Carnwath J’s new approach is that the plaintiff in a third-party case is entitled to recovercosts as damages from the defendant but is limited to the procedural law’s default measure of thosecosts. Currently, that default measure is standard costs.

221 Carnwath J’s new approach in British Racing has been met with hostility. For example,

McGregor on Damages (Sweet & Maxwell, 18th Ed, 2009) at p 712) believes the new approach to be“flawed” and urges the English courts not to follow it. With diffidence, I agree with Carnwath J anddisagree with McGregor.

222 The truth is that there is no distinction of principle between same-party cases and third-partycases. The procedural rules on joinder of causes of action and joinder of parties in O 15 and onjoinder of third parties in O 16 are now drawn extremely widely. They advance the policy ofsuppressing multiplicity of proceedings and avoiding inconsistent findings of fact. The result is thatvirtually every third-party case could be litigated as a same-party case.

2 2 3 Ganesan Carlose is a case in point. It was litigated as a same-party case. The mothercommenced a single action naming the law firm as the third defendant together with the bank as thesecond defendant and the company as the first defendant. But she could equally easily have sued thecompany and the bank in one action, seen how that action went, and then sued the law firmseparately. She did not do so. That was merely a matter of litigation tactics and strategy. It is not adistinction of principle. That can be demonstrated by two thought experiments.

224 First, assume that at the end of the liability phase in Ganesan Carlose, the mother had,contrary to the facts, sought and secured an order against the law firm that it pay her own costs ofher successful claim against the son’s company and of her unsuccessful claim against the bank. Themere fact that the law firm had breached a duty of care to the mother would have been no groundsfor awarding costs against the law firm on the indemnity basis. So, those costs would by default havebeen taxed on the standard basis. If the mother then commenced a second action against the lawfirm to recover the difference between the standard costs awarded to her in the first action and herown actual costs of the first action, that second action would have failed. It would beindistinguishable from Quartz Hill. The result would be that the mother’s compensation for her owncosts in the first action – caused by the law firm’s negligence – would be limited to the standardcosts which she had recovered in the first action.

225 Second, rewind to the very beginning of the litigation. Assume, contrary to the facts, that themother sues the company and the bank but not the law firm. She succeeds against the company bydefault and loses against the bank at trial. She then commences a separate action against the lawfirm. In this second action, she claims as damages an actual indemnity for her own costs of the firstaction. The orthodox rule said to apply in third-party cases dictates that she should recover anactual indemnity under the substantive law, subject only to the principles of causation, foreseeability,remoteness and mitigation.

226 But should the substantive law permit the mother to increase the extent of the law firm’specuniary liability simply by her tactical choice to sue the law firm separately? Put another way,should the substantive law let the extent of the law firm’s obligation to compensate the motherdepend on the happenstance of litigation rather than on the innate culpable quality of its acts andomissions? Should the substantive law encourage a plaintiff to sue defendants separately – contraryto the policy underlying the joinder and third-party rules – in order to enhance his entitlement to

recover compensation? Carnwath J’s answer to all these questions is no: whether the claim is litigatedas a same-party case or a third-party case should not in itself make a difference to the plaintiff’sentitlement to damages or to a wrongdoer’s liability to pay damages. That is my answer too.

2 2 7 British Racing, conversely, could quite easily have been litigated as a same-party case.Although the negligent law firm was not a defendant to the plaintiff’s original action, the defendantsto that action used the third-party procedure under the RSC to join the negligent law firm to theaction as a third party to the original action. So, assume that that original action had gone to trialinstead of being settled. At the conclusion of the trial, the court would have applied the indemnityprinciple to shift costs to follow the event and set the basis for quantifying costs as between plaintiffand defendants. If the plaintiff had won, the default position would be that the defendants would paythe plaintiff’s own costs and that those costs would be assessed on the standard basis. If thedefendant won against the law firm, it could then recover from the law firm the costs it had to paythe plaintiff. But the law firm’s liability would be limited to the standard costs which the defendantwas to pay to the plaintiff. Should the law firm’s liability be greater simply because it is now beingsued by the plaintiff directly? This is the point which troubled Carnwath J.

228 In the bulk of cases, therefore, the distinction between the same-party case and the third-party case is too fragile and unprincipled a basis to justify one rule applying in the former and theentirely opposite rule applying in the latter. Having said that, there is undoubtedly a class of caseswhere a different rule might apply because the plaintiff who seeks to recover costs as damages couldnot have asserted a cause of action against the defendant in the earlier proceedings. That class ofcases would include cases where the plaintiff had no cause of action against the defendant at thetime of the earlier litigation. An example is a claim for costs as damages in the tort of maliciousprosecution arising either from criminal proceedings (as in Berry) or in the exceptional cases where itis available in respect of civil proceedings (as in Quartz Hill). Another class of cases would includecases where the plaintiff had no way of knowing that he had a cause of action against the defendantat the time of the earlier litigation. An example of this is a claim for the costs of earlier proceedings asdamages in an action seeking to set aside a judgment obtained in those earlier proceedings by a fraudof the other party. Another class of cases is where the costs were incurred in proceedings in a forumother than the forum considering the claim for those costs as damages. That can arise where a partyseeks to litigate in an inappropriate forum in breach of an exclusive jurisdiction clause or in breach ofan arbitration clause. A final example is where the earlier proceedings did not involve thedetermination of a lis and therefore could not have joined the third-party to the earlier proceedings tomake it a same-party case. But I need not explore these cases or the recoverability of costs asdamages in these cases further.

229 Carnwath J’s decision in British Racing was a decision based on policy and principle. It did notturn on the measure of recovery under the procedural law. But he was obviously comforted in arrivingat his decision by dicta in Lonrho indicating that limiting a plaintiff in a third-party case to standardcosts did not undercompensate the plaintiff. The 1986 amendments to the RSC replaced the test ofnecessity in the taxation of costs with the test of reasonableness. That meant that it could beargued that taxed costs were now quantified on broadly the same basis as the basis on whichdamages were assessed. The result was that a plaintiff in a same-party case who had received in theearlier action an award of costs on the standard basis received an award which was closer than everto an actual indemnity. So too, a plaintiff in a third-party case whose claim for costs as damages wastaxed on the standard basis in the second action.

230 There appears to be a wider margin between standard costs and indemnity costs and betweenindemnity costs and solicitor and own client costs in Singapore than in England. But, as I have shown,this margin exists to enhance access to justice. If there is no distinction in principle between a same-

party case and a third-party case, then the policy of enhancing access to justice applies equally toboth and dictates that the procedural law’s limits on recoverability of costs should prevail in both overthe substantive law’s aim of full compensation.

Union Discount Co Ltd v Zoller

231 Does it make a difference if the costs being claimed as damages were incurred in proceedings ina foreign jurisdiction? The English Court of Appeal considered this question in Union Discount Co Ltd vZoller and others [2002] 1 WLR 1517 (“Union Discount”). The plaintiff and the defendant entered intoa contract with an English exclusive jurisdiction clause. The plaintiff sued the defendant in England onthe contract. The defendant reacted by suing the plaintiff in New York on the same contract. Theplaintiff relied on the exclusive jurisdiction clause and succeeded in striking out the New Yorkproceedings. The plaintiff did not, however, ask the New York court for an award of the costs of theNew York action. The plaintiff then added, in the English proceedings, a claim for the costs it hadincurred in striking out the New York proceedings. That claim was itself struck out at first instance inthe English proceedings as disclosing no reasonable cause of action. The English Court of Appealdisagreed. It held that the plaintiff’s failure to ask for costs in New York was no bar to its claim inEngland to recover those costs because an application for costs in the New York proceedings couldnot possibly have yielded any award of costs – whether on the indemnity principle or otherwise (at[11]).

232 Schiemann LJ delivered the judgment of the court in Union Discount. He set out the passagefrom Berry which I have cited at [197] above and then held (at [11]):

… it is clear that Devlin LJ considered that, in a case such as the present, where there was in theearlier action no prospect of obtaining costs although there had been no fault on behalf of thesuccessful party, there was no policy inhibition on granting him the amount of those costs asdamages in a later action if he had available to him an appropriate cause of action.

233 The Court of Appeal also held (at [26]) that there was no res judicata in the narrow sensebecause the New York court had not ruled on the recoverability of the costs of the New York action.There was also no res judicata in the wider sense because the plaintiff’s claim for costs as damagescould not have been brought in the New York given that it was the English courts which had exclusivejurisdiction over the parties’ disputes.

234 Thus, in Union Discount, Schiemann LJ said (at [32]):

There remains the question whether there is a policy reason for the benefit of society at largewhich argues in favour of applying the usual rule in cases where the costs sought to berecovered as damages represent the cost of litigation abroad in breach of an exclusive jurisdictionclause. In the present case we can see none unless it be a desire to keep down litigation purelyinvolving costs — often referred to as parasitic litigation. A rationale behind the reluctance tofacilitate parasitic litigation is that the state's legal resources should be devoted to central ratherthan parasitic questions. While this seems attractive, one must note that the amount of costs (ordamages in the form of costs) at stake can be very much more than many a sum which otherwiseis allowed to be recovered as damages.

[emphasis in original]

235 It is notable that in Union Discount, the plaintiff’s litigation in England could not be said to beparasitic on other English litigation. So while the Court of Appeal explicitly acknowledged the interest

in suppressing parasitic litigation, it made clear that that interest alone is not capable of prevailingover the substantive law’s policy of full compensation, particularly where the earlier litigation hadtaken place in another forum.

236 The plaintiff in Union Discount had a cause of action against the defendant which wasindependent of the subject-matter of the previous proceedings in New York. That was a necessarybut not in itself a sufficient foundation for recovery. The plaintiff’s cause of action succeeded onlybecause – as in Berry – there had been no prospect of securing a costs order under the indemnityprinciple in the New York proceedings. It is because of that, and only because of that, that theplaintiff’s failure to seek an award of costs in New York did not count against it in the Englishproceedings.

237 The Court of Appeal in Union Discount did not have to consider the quantum of the plaintiff’srecovery of costs. The matter came before the Court of Appeal on a question of liability alone, arisingfrom an appeal against a successful striking out application. But it is likely that the damages would bequantified by way of an assessment of damages under the substantive law, not by taxation under theprocedural law. This makes sense. The recoverability in English proceedings of costs incurred in NewYork proceedings does not engage any aspect of policy arising from English procedural law. So itwould be reasonable to expect that the specialised procedure established for quantifying costsincurred in English proceedings has no role to play in quantifying costs arising from litigation in anotherforum.

National Westminster Bank plc v Rabobank Nederlands

238 Like Union Discount, National Westminster Bank plc v Rabobank Nederland [2007] All ER (D) 186(May) (“Rabobank No 1”) and National Westminster Bank plc v Rabobank Nederland [2008] 1 All ER(Comm) 266 (“Rabobank No 3”) was a same-party case where the previous litigation between thesame parties was in a foreign jurisdiction – in this case California. The difference is that in theRabobank litigation, the plaintiff sought and recovered some of its costs unlike the plaintiff in UnionDiscount. Did that make a difference?

239 In Rabobank No 1 and Rabobank No 3, the facts were as follows. The defendant covenanted bydeed not to sue the plaintiff. The deed was governed by English law. In breach of the covenant, thedefendant sued the plaintiff in California. The plaintiff eventually secured the dismissal of the entiretyof the California action (Rabobank No 1 at [19]). California civil procedure empowered the court toaward to a successful party by way of costs certain limited disbursements only (Rabobank No 3 at[24]). But a successful party had no prima facie entitlement under California civil procedure to anindemnity, or deemed indemnity, in respect of costs (Rabobank No 1 at [435]). The plaintiff hadsought and secured a limited costs order in California but that had been struck out on appeal(Rabobank No 1 at [437]). There remained a possibility that the California court could at some point inthe future make an order, within its limited jurisdiction, for costs (Rabobank No 1 at [440]). Theplaintiff sued the defendant in England and sought to recover the costs it had incurred in defendingthe California proceedings as damages for breach of the covenant not to sue.

240 Sir Anthony Colman distilled Devlin LJ’s analysis in Berry into six propositions in Rabobank No 3(at [13]):

(i) In a civil action an order that a losing party should pay party and party costs is deemed inthe manner of a presumption fully to compensate the winning party for the whole of his costs inspite of the fact that it may not actually do so.

(ii) If the court deprives the successful party of the whole or part of his costs, that is becausehe deserves not to be compensated because he has needlessly incurred such expenditure andtherefore to that extent caused his own loss.

(iii) When at the close of a civil trial the court determines that the successful party shouldrecover the whole or part or no part of his costs and whether or not on a party and party basis,its order is an adjudication upon the issue as to the loss suffered by the successful party byreason of legal costs and expenses.

(iv) The conceptual basis of the rule preventing subsequent claims for damages being deployedto make good unrecovered costs is expressed by Devlin LJ ([1961] 3 All ER 65 at 76, [1962] 1 QB306 at 329):

‘To be effective as an interposition, there must be a sort of res judicata, a decision in thefirst case in which costs are awarded on the very point that is in issue in the second case,ie, the quantification of the damage. In a civil case the judicial discretion is directed toquantifying the damage according to the conventional measure. In a criminal case, it is not:and the decision contained in a criminal award need not represent a decision onquantification at all.’

The practical need for such a rule was that in its absence ‘every successful plaintiff might bring asecond action against the same defendant in order to recover from him as damages resulting fromhis original wrongdoing the costs he failed to obtain on taxation.’ …

(v) By contrast, in a criminal case the discretionary order that the prosecution should paycosts was not necessarily intended to achieve a full indemnity, whether actually or on aconventional basis, for, unlike an order for costs in a civil action, the discretion was not requiredto be exercised so as to achieve complete, or conventionally complete, compensation. As DevlinLJ put it… :‘the decision contained in a criminal award need not represent a decision onquantification at all.’

(vi) Because the issue in the second case was not the same as the issue in the first case, sincethe issue in the first case was not that of the quantification of the damage attributable toincurred legal costs, the rule applicable to civil cases did not apply with regard to costs awards incriminal cases.

I accept these six propositions as correctly setting out the law in a same-party case where the costswere incurred in earlier proceedings in the same forum.

241 Colman J applied these principles distilled from Berry in (Rabobank No 1 at [439]) to hold thatthe plaintiff was entitled to recover the costs of the California proceedings as damages. It did notmatter that the plaintiff had sought an order for costs in California and failed because the Californiacourt did not, in any event, have the power to award costs on the indemnity principle. It also did notmatter that the California court could in future make a limited costs order because appropriate stepscould be taken to prevent double recovery. In Rabobank No 1, he held at [439]:

I find nothing inconsistent between this conclusion and anything that was said in Berry v. BritishTransport Commission [1962] 1 QB 306… for in this case there is no question of duplication of acause of action in order to recover by way of damages in one set of proceedings or jurisdictionwhat could not be or has not been recovered as costs in a previous set of proceedings foundedon the same cause of action.

242 Rabobank No 3 was the sequel once-removed to Rabobank No 1. In it, Sir Anthony Colman hadto determine the measure of the plaintiff’s damages arising from the wrongfully-brought Californiaaction. As in British Racing, it was not suggested by either party in Rabobank No 3 that the plaintiff’scosts should be assessed by an assessment of damages or by any procedure other than by taxation.The only issue for Sir Anthony Colman – as it was for Carnwath J in British Racing – was whether thetaxation should be on the standard basis or on the indemnity basis. Under the CPR, the test ofproportionality is part of the applicable English procedural law when assessing costs on the defaultstandard basis under but not when assessing the costs on the indemnity basis (see Part 44.4(2) and44.4(3) of the CPR). So the question for Sir Anthony Colman resolved into the question whether therewas any rule of English public policy underlying the recovery of costs as damages which dictated thatthe plaintiff’s damages, being in respect of costs, be limited not just by reasonableness but also bythe principle of proportionality.

243 Sir Anthony Colman concluded that any rule of English public policy by which costs awarded inprevious civil proceedings are deemed to indemnify a party for the actual costs of those proceedingsapplies only when those previous costs are awarded by an English court under English procedural law,including the indemnity principle and the principle of proportionality if applicable (Rabobank No 3 at[25]). He further held that the introduction of the concept of proportionality in the test for standardcosts meant that standard costs were no longer in principle or in practice a virtual indemnity foractual costs (at [26]). He therefore concluded that the costs of the California proceedings should beassessed on the indemnity basis (at [27]).

244 Sir Anthony Colman’s decision in Rabobank No 1 on liability is clearly sound. No aspect of thepolicy of English procedural law was engaged. English procedural law has no policy of enhancingaccess to justice in California. The procedural policy of achieving finality in litigation was not engagedbecause no court, whether in England or elsewhere, had yet considered the question of indemnifyingthe plaintiff against the costs of the California litigation. It is true that the plaintiff did seek costsfrom the California court. But that could not be held against the plaintiff because the California courthad no power to award an indemnity or a deemed indemnity. Finally, the English litigation was notparasitic litigation: the defendant’s liability in damages arose from a cause of action in breach ofcontract and included heads of loss other than the costs of the California proceedings. The onlycuriosity is that an English taxation of costs was adopted as the procedure to quantify costs incurredin a foreign forum rather than the usual assessment of damages.

245 For present purposes, though, the important point to note is that the independent cause ofaction which the plaintiff had against the defendant arising from the breach of the covenant not tosue was a necessary but not a sufficient condition for the plaintiff to recover the costs of theCalifornia proceedings. If, contrary to the facts in the Rabobank litigation, the earlier costs had beenincurred in proceedings in England, it is clear that the claim for those costs as damages would havebeen barred.

Carroll v Kynaston

246 Can a plaintiff claiming unrecovered costs as damages succeed if the earlier litigation did notconsider the issue of costs at all, as opposed to considering the issue and making no order as tocosts (as in Quartz Hill)? The English Court of Appeal considered this question in Carroll v Kynaston[2011] QB 959 (“Carroll”).

247 In Carroll, Mr Carroll and Ms Kynaston were litigants in person locked in a long-running andbitter action with claims and counterclaims. By the time of trial, all that was left to be tried was MsKynaston’s counterclaim in defamation against Mr Carroll. Shortly before the counterclaim came on for

trial, the parties entered into a settlement agreement. A dispute then arose between the partieswhether they had reached a settlement at all; and if so, whether either party had breached the termsof the settlement. So the action proceeded to trial before Field J for him to determine as a preliminaryquestion whether the action had indeed been settled.

248 Immediately after hearing the parties’ submissions, Field J delivered an ex tempore judgment intheir presence. He accepted Mr Carroll’s submission that he and Ms Kynaston had settled the action.He therefore granted a declaration to that effect. That declaration obviated a trial of thecounterclaim and therefore disposed of the entire action before Field J. But it did not resolve theparties’ dispute as to whether there had been a breach of the settlement agreement. So Field J wenton in his ex tempore judgment to give the parties a detailed protocol as to how they were to assertand pursue their claims for breach of the settlement agreement, if necessary by commencing separateproceedings.

249 At that point, Field J came to the end of his ex tempore judgment. Utterly exasperated withthe litigants, Field J rose to walk out of court. It appears that Mr Carroll also then rose to invite FieldJ to make an order for the costs of that hearing in his favour and against Ms Kynaston. Mr Carroll mayeven have said words to that effect. But it appears that Field J left without inviting any submissionson costs, without seeing Mr Carroll rise to his feet, without hearing any precatory words (if said) oncosts, without hearing any submissions on costs and without making any order as to costs. Mr Carrollcould have asked Field J’s associate immediately to call the judge back to hear submissions on costs.There was no suggestion that Mr Carroll did that. Thereafter, Field J himself drew up the formal orderof court. Like his ex tempore judgment, it made no mention of costs. Despite this, Mr Carroll did notwrite to Field J to invite him to vary his order to include an order for costs. Nor did Mr Carroll seekleave to appeal Field J’s order on the issue of costs alone.

250 Instead, Mr Carroll commenced a new action against Ms Kynaston for breach of the settlementagreement, relying on Field J’s protocol. In this new action, Mr Carroll sought to recover the costs hehad incurred in securing Field J’s declaration that the earlier litigation had been compromised asdamages for Ms Kynaston’s breach in trying to proceed with the trial of the counterclaim despite thesettlement. Mr Carroll’s new action came on for trial in due course before Sharp J. She dismissed MrCarroll’s claim. He appealed.

251 Before the Court of Appeal, Mr Carroll argued that his claim for costs fell outside the ruleapplied in Quartz Hill because (at [17]): (1) Field J’s order specifically contemplated furtherproceedings between the parties for breach of the compromise agreement; (2) Mr Carroll was notgiven an opportunity to ask for his costs before the trial judge; and (3) Mr Carroll’s current cause ofaction against Ms Kynaston was free-standing and independent of the cause of action litigated in theearlier action.

252 The Court of Appeal considered and rejected each of Mr Carroll’s three arguments. On the firstargument, Ward LJ said (at [19]):

It is preposterous to think that Field J had in mind a claim for damages for breach of thecompromise agreement when the measure of that alleged damage was the very costs that it waswithin his power to order or not as the case may be. There was no earthly reason why he wouldhave given directions for a separate action to determine the costs of and incidental to his havingto rule whether or not there was a compromise of the counterclaim in which case thecounterclaim would be dismissed, or if not, the trial would proceed. He was making it perfectlyplain that there was a binding agreement of settlement which brought the counterclaim to an endbut he acknowledged, for example in para 7 of his judgment, that there may or may not be a

dispute over the meaning of the agreement.

253 The Court of Appeal rejected Mr Carroll’s second argument as well. He had had an opportunityto seek costs from Field J. Even if Mr Carroll could not reasonably have exercised that opportunity inField J’s presence because of Field J’s unexpected and exasperated express exit after the ex temporejudgment, Mr Carroll could have asked the judge’s associate to invite Field J to return to court to hearhis submission. He could have asked the judge to vary the order once it had been drawn up formallyand perfected. He could have sought leave to appeal against Field J’s omission to deal with costs. Hedid none of these things. Although Mr Carroll was a litigant in person, it was not unfair to hold that allof that precluded him from arguing that he had had no opportunity to seek an order for costs beforeField J. As Ward LJ said (at [20]), Mr Carroll “may be a litigant in person but he is an experiencedlitigant in person and nothing we know about him suggests he is a shrinking violet unable to fight hiscorner”.

254 The Court of Appeal rejected Mr Carroll’s third argument as well. Although Mr Carroll did have afree-standing cause of action for breach of the compromise agreement and even though that waswholly distinct from the original causes of action underlying the compromised proceedings, that was ofno assistance. As Ward LJ said (at [30]):

As I have indicated, the instant case can be distinguished from [Berry]… because the costs therewere costs awarded under the different regime operating in the criminal courts… Here the costsof the hearing before Field J could have been recovered if he had so ordered. If the [plaintiff] didnot ask for the costs, then he failed to mitigate his loss and cannot recover them as damages ina subsequent action on that ground. His difficulty is compounded by the fact that the judge diddeal with costs: he made no order as to the costs. As the citations from the judgments ofBowen, Devlin and Danckwerts LJJ [in Quartz Hill and in Berry] all make clear, that is the end ofit: “If the judge refuses to give him costs, it is because he does not deserve them: if he deservesthem, he will get them in the original action”: 11 QBD 674, 690. “If he does not get his costs, itmeans either that it was not necessary for him to incur them or that there has been some faultor misconduct for which he is responsible”: [1962] 1 QB 306, 325. “Consequently, if a successfulparty is, in the exercise of the judicial discretion in any particular case, refused costs, that is alsoan end of the matter”: [1962] 1 QB 306, 336.

255 There are two ways of looking at Carroll. The first view is that Field J took a considereddecision to deprive Mr Carroll of the costs which would ordinarily have followed the event but Field Jfailed to articulate that aspect of his decision in his ex tempore judgment or in the formal order helater drew up. Ward LJ’s passage quote above appears to support that view. On that view, the resulti n Carroll is the straightforward application of the rule applied in Quartz Hill. The policy of theprocedural law which is engaged is the policy which deems costs awarded (or in this case withheld) inearlier civil litigation on the indemnity principle to be a true indemnity.

256 The other view of Carroll is that Field J did not deal with costs at all. If this is the correctview, then there was no deemed indemnity in the litigation before Field J for the Court of Appeal tohold Mr Carroll to in the later litigation before Sharp J. But the Court of Appeal nevertheless held thathis action before Sharp J failed entirely. On this view, the only policy of the procedural law which theCourt of Appeal could have upheld was the policy in favour of achieving finality in litigation: resjudicata in the wider sense.

257 Ward LJ’s judgment in Carroll shows traces of this view also (at [31]):

There must be finality in litigation… The claimant should not be entitled to recover more by way

of damages than he could have recovered by way of costs for reasons held good since Cockburnv Edwards 18 Ch D 449. The excess is an irrecoverable luxury. The claimant’s true remedy was toappeal the order actually drawn by Field J. He did not do so. He cannot now do so. He cannotnow get by the backdoor what he failed to secure by opening the front door.

258 On either view, the result is that a civil litigant who could have asked for costs in earlierlitigation but failed to do so is in precisely the same position as a civil litigant who could have and didask for costs in the earlier litigation. Carroll v Kynaston is therefore the more typical example(involving successive actions) of the principle applied in Ganesan Carlose (involving a single action).

The plaintiffs cannot recover their unrecovered costs

Court of Appeal’s costs orders

259 I now return to the case before me. The Court of Appeal concluded its judgment in Ng EngGhee (CA) (at [212]) with the following invitation: “Parties are to write in within a week with theirsubmissions on the appropriate costs to be awarded”. I make two points about this invitation. First,the Court of Appeal extended this invitation only to the parties to CA119 and CA120. Mr Then and MsTan were entitled to appeal against Choo J’s decision in Ng Eng Ghee (HC) but chose not to. Theywere therefore not parties before the Court of Appeal. It did not, therefore, direct its invitation tothem. Nor did it direct its invitation to Mr Lo. He was in an even worse position than Ms Tan and MrThen: he was not even entitled to appeal against Choo J’s decision on OS5 because he discontinuedthose proceedings. Second, the Court of Appeal’s invitation to the parties was an open-ended one toaddress costs generally. It did not qualify in any way the particular issues on costs on which it invitedsubmissions. To be more specific, the invitation did not limit the parties to seek costs only against theother parties to CA119 and CA120.

260 In response to this invitation, on 8 April 2009, Mr Darmawan filed written submissions on behalfof three plaintiffs: himself and his wife and Ms Sadeli. In his submissions, Mr Darmawan asked theCourt of Appeal to award these three plaintiffs indemnity costs against the consenting subsidiary

proprietors and jointly and severally against HPPL for the following proceedings: [note: 48]

(a) Their application for leave to seek judicial review of the STB’s decision to compress

timelines in STB43 (OS1057); [note: 49]

(b) The first tranche of hearings in STB43 which ended in dismissal of the Collective Sale

Application on 3 August 2007; [note: 50]

(c) The consenting subsidiary proprietors’ appeal to the High Court against the first STBdecision (OS1269) and these three plaintiffs’ own cross-appeal against the STB decision to make

no order as to costs (OS1270); [note: 51]

(d) The second tranche of hearings in STB43 which ended in the collective sale order on 7

December 2007; [note: 52]

(e) Their appeal as litigants in person to the High Court against the second STB decision

(OS11); [note: 53] and

(f) Their appeal as litigants in person to the Court of Appeal against the decision of Choo J inOS11 (CA120).

These are substantially the same proceedings for which these three plaintiffs seek before meequitable compensation for their unrecovered costs.

261 Attached to Mr Darmawan’s submissions dated 8 April 2009 was a letter addressed to the Courtof Appeal also dated 8 April 2009 from Ms Tan and Mr Then. They wrote to the Court of Appeal asnon-parties. In it, they asked for an award of costs in their favour for the proceedings set out in[260] above, save for CA120 to which they were not a party. It is significant that Mr Darmawan feltable to put Ms Tan’s submissions on costs forward and Ms Tan felt able to make those submissions oncosts despite not the Court of Appeal not having invited any submissions on costs from non-parties tothe appeal.

262 On the same day, 8 April 2009, HEP put in its submissions on costs on behalf of its clients. MrLo also submitted a letter dated 8 April 2009 to the Court of Appeal asking for an award of costs forOS5. He too presumably felt the Court of Appeal’s invitation was wide enough to permit him to put inthis request.

263 On 9 April 2009, HPPL as interveners put in their written submissions on costs. On the sameday, the consenting subsidiary proprietors put in their written submissions on costs.

264 On 11 May 2009, the Court of Appeal by letter invited the parties (that is, excluding Mr Lo, MrThen and Ms Tan) to make submissions on the following specific questions relating to costs:

(a) Whether only one set of costs should be awarded where similar arguments/submissionswere made by or on behalf of more than one party on the same side; and

(b) Whether costs ought to be awarded to objecting owners (such as Mr Lo, Mr Then and MsTan) who contested the collective sale application before the STB but did not appeal from theorder made.

265 On 18 May 2009, Mr Darmawan filed further written submissions on behalf of himself, MsSeteono and Ms Sadeli addressing these two issues. Attached to these submissions was a letter alsodated 18 May 2009 from Ms Tan and Mr Then as non-parties addressed to the Court of Appeal settingout their submissions on these two issues. Again, I note that Mr Darmawan felt able to put to put MsTan’s further submissions on costs forward to the Court of Appeal and that Ms Tan felt able to makethose submissions despite not having been invited to do so.

266 In Ng Eng Ghee (Costs), the Court of Appeal made the following holdings of principle:

(a) The Court of Appeal declined to award indemnity costs to any of the objecting subsidiaryproprietors because the matters they had raised did not make a sufficiently compelling case for adeparture from the usual award of costs on the standard basis (at [31]).

(b) The Court of Appeal held that it had the power to award costs in favour of Mr Then andMs Tan even though they did not appeal against Choo J’s decision in OS11 and were thereforenot parties to CA120.

(c) Insofar as the plaintiffs were entitled to the costs of any particular set of proceedings,those costs would be discounted by 20% to account for the duplication of work with theobjecting subsidiary proprietors represented by HEP, the legal relevance of the points taken andthe cogency of the contentions advanced (at [28]).

(d) HPPL had engendered the continuation of the dispute by, amongst other things,commencing OS1238 seeking damages for the consenting subsidiary proprietors’ alleged breach ofcontract (see [43] above) and were therefore jointly liable with the consenting subsidiaryproprietors for the costs incurred by the objecting subsidiary proprietors after that date (at [37]– [39]).

267 The Court of Appeal then made the following costs orders in favour of the plaintiffs(summarised in Ng Eng Ghee (Costs) at [43]):

(a) The Court of Appeal declined to award any costs to the plaintiffs for the first tranche ofthe Collective Sale Application because the ground on which the STB dismissed the CollectiveSale Application at the end of the first tranche – a defect in the consenting subsidiaryproprietors’ documentation – was not a ground which the plaintiffs had raised (at [29] – [30]).

(b) For the same reason, the Court of Appeal declined to award any costs to the plaintiffs forOS1269, the consenting subsidiary proprietors’ appeal from the STB’s decision in the first tranche(at [29] – [30]).

(c) The Court of Appeal ordered the consenting subsidiary proprietors to pay the plaintiffs 80%of one set of costs for the second tranche of the Collective Sale Application to be taxed on thebasis of two counsel and to be shared equally by Mr Darmawan, Ms Seteono and Ms Sadeli on theone hand and Mr Then and Ms Tan on the other hand (at [28] and [43(c)] – [43(d)]).

(d) The Court of Appeal ordered the consenting subsidiary proprietors and HPPL jointly to pay80% of one set of reasonable compensatory costs to Mr Darmawan and Ms Seteono and MsSadeli as litigants in person in OS11.

(e) The Court of Appeal ordered the consenting subsidiary proprietors and HPPL jointly to pay80% of one set of reasonable compensatory costs to Mr Then and Ms Tan as litigants in person inOS11 (at [29] – [30]).

(f) The Court of Appeal ordered the consenting subsidiary proprietors and HPPL jointly to pay80% of one set of reasonable compensatory costs to Mr Darmawan, Ms Seteono and Ms Sadeli aslitigants in person in CA120.

268 The Court of Appeal could not, obviously deal with the costs of OS1057 (the plaintiffs'application for leave to seek judicial review of STB's decision to expedite first tranche of theCollective Sale Application) and the costs of OS1270 (the plaintiffs' appeal against STB’s decision inthe first tranche to make no order as to the costs of the first tranche) as they were outside thecontinuum of proceedings which originated in STB43 and culminated in CA120. The plaintiffs failed inOS1057. That, of necessity, means that OS1057 was unmeritorious litigation for which the plaintiffsdid not deserve a compensatory order for costs. The plaintiffs incurred those costs because: (1) theSTB set a compressed timeline for the first tranche of STB43 not as a result of anything done by thedefendants or the consenting subsidiary proprietors but as a result of agitation by HPPL; and (b) theplaintiffs’ decision to commence OS1057 was tactical and the application was unmeritorious, asindicated by Tan J’s dismissal of it (see [141] – [142] above). I therefore hold that the plaintiffs’costs of OS1057 are too remote from the defendants’ breaches of fiduciary duty.

269 OS1270 did not proceed to a determination and it is not clear what costs order was made. Butit appears to have been subsumed both on the merits and on the issue of costs by Choo J’s decisionin OS1269.

Plaintiffs rely on the same cause of action

270 The plaintiffs’ position is that their claim for costs as equitable compensation is not barred bythe Quartz Hill line of cases for two reasons. First, the defendants were not parties to the CollectiveSale Application which originated in STB43 and culminated in CA120. This is therefore not a same-party case. Second, the plaintiffs submit that they assert a cause of action in the actions before mewhich is separate and distinct from the cause of action underlying the Collective Sale Application.

271 It is true that the defendants were not parties to the Collective Sale Application, at least notdirectly and not in the capacity in which they are now sued. And it is true that the Collective SaleApplication did not assert a cause of action for equitable compensation by the plaintiffs. But thoseare not to my mind the determinative factors given the unusual nature of collective sale proceedings.A collective sale application is an application under statute. It is not founded on wrongdoing. It doesnot assert any cause of action. It is brought by a limited number of plaintiffs on behalf of themselvesand as representatives for all other consenting subsidiary proprietors. It has direct binding effect onall subsidiary proprietors through a combination of statute and contract. It is determined at firstinstance by a specialised tribunal acting inquisitorially and not by a civil court acting curially andadversarially. Any appeal to the High Court is only on a question of law. Civil litigation, on the otherhand, springs from wrongdoing. It involves a plaintiff asserting a cause of action by which he invites acivil court to hold a defendant liable for breach of a civil obligation where the defendant disputesliability. Civil litigation has direct binding effect only on the parties to the litigation. A collective saleapplication is not civil litigation. It is sui generis.

272 The only question in the Collective Sale Application for the STB was whether the statutoryprerequisites for granting a collective sale order were satisfied. It held in its second decision that theywere satisfied. The High Court and the Court of Appeal had to determine whether the STB had erredin law. In the course of determining that, the Court of Appeal made findings that the First SC owedfiduciary duties to the subsidiary proprietors and had breached those duties.

273 Where a plaintiff seeks to recover damages for costs incurred in prior proceedings which are suigeneris, what is determinative is not the procedural configuration of the prior proceedings but thesubstance of the matter. I therefore start with the use to which the plaintiffs seek to put CA120 inthe actions before me. The plaintiffs’ position is that CA120 established conclusively the defendants’breaches of fiduciary duties. I have agreed with them. It is further the plaintiffs’ position that the onlymatters left for me to decide in light of CA120 are causation of loss and quantum of compensation.That is a crucial indication that the actions before me do not assert a cause of action which is whollyindependent of the Collective Sale Application. Indeed, that indicates to me that the actions beforeme are wholly dependent on the Collective Sale Application. If the plaintiffs were in truth asserting aseparate cause of action before me, it would be for me to determine all aspects of that cause ofaction: liability, causation and quantum. That was the position in each of the cases which I haveanalysed above in which a claim for costs as damages was asserted, even in those cases where itwas asserted and failed.

274 Further, the unusual nature of a collective sale application means that none of the decidedcases I have analysed above is an applicable analogy to guide the result in this case. I must thereforeconsider the policies underlying the special rules governing the recovery of compensation for costs todetermine whether the plaintiffs are entitled to succeed.

Plaintiffs seek to recover what they failed to recover in CA120

275 My starting point is that the substance of the plaintiffs’ claim in the actions before me is to

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recover an indemnity for their costs. That is the same measure of compensation which they sought ascosts from the Court of Appeal in CA120. But the Court of Appeal expressly rejected the plaintiffs’application for indemnity costs and held that they were entitled only to the default standard costs.And even then, the Court of Appeal awarded them only a specific proportion of those costs.

276 In the actions before me, the plaintiffs try again to recover an actual indemnity for their costs,after giving credit (as they must) for the costs they have recovered from the consenting subsidiaryproprietors and HPPL pursuant to Ng Eng Ghee (Costs). The defendants point out that what theplaintiffs seek to recover before me is exactly what they sought and failed to recover from the Courtof Appeal in Ng Eng Ghee (Costs). The plaintiffs admit this. The following extract from Mr Darmawan’s

cross-examination shows the plaintiffs’ purpose: [note: 54]

You got the costs order, you asked for indemnity costs, you didn’t go get it, so now youdecided how to go and get indemnity costs?

Yes.

So if the Court of Appeal had accepted your arguments, and given you indemnity costs, wewouldn’t be here today, am I right?

Yes. If I’m fully indemnified, I won’t be here today.

…

You knew what indemnity costs meant, am I right?

Indemnity means made whole, be made whole. No, a single – no loss. Indemnity. That, to me,is the meaning of “indemnity”.

So that is what you wanted the Court of Appeal to give you?

Yes.

And you made this clear in your submission, am I right?

Yes.

And they didn’t give it to you, am I right?

No, they did not.

And because they didn’t give it to you, you went running off to Tan Kok Quan Partnership tosee how you could get the balance, am I right?

Yes.

If they had given it to you, we won’t be here today, am I right?

Yes.

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Would I be correct to say that what sparked off this action is the decision of the Court ofAppeal not to award you indemnity costs?

Particularly paragraph 19 of the costs judgment, yes. Yes, to your answer.

So the whole idea of this action is to get indemnity costs, am I right?

Yes.

277 The plaintiffs are clearly therefore inviting me to determine the same question which the Courtof Appeal in CA120 and Tan J in OS1057 has already dealt with: what sum of money will indemnify theplaintiffs for the costs which they incurred in those proceedings. The plaintiffs can pose that questionfor me to determine only if they can show that the Court of Appeal did not or could not apply theindemnity principle in awarding costs (Berry, Union Discount) or that the plaintiffs had no opportunityin CA120 to seek an indemnity for the costs of the collective sale litigation against the defendants(British Racing, Rabobank). If they did have that opportunity but failed to grasp it, their claim mustfail (Ganesan Carlose, Carroll).

278 I hold that they had that opportunity and failed to grasp it.

Court of Appeal did apply the indemnity principle

279 It is clear from the Court of Appeal’s reasoning in Ng Eng Ghee (Costs) that it applied theindemnity principle in arriving at its carefully calibrated decision as to costs in CA120. The plaintiffs donot and cannot suggest otherwise.

280 Although a collective sale application is not litigation in the true sense of the term, it is beyondargument that the power of the STB, and on appeal the High Court and the Court of Appeal, to awardcosts in STB proceedings rests on the indemnity principle. That must be so. In collective saleproceedings, just as in traditional litigation, the procedural law must balance the benefits ofindemnifying successful applicants against the need to protect losing parties against unreasonablecosts and the benefits of not deterring potential parties from seeking to vindicate their rights. Indeed,it could be said that the balance struck by the indemnity principle is all the more necessary incollective sale proceedings because an objecting party will be objecting in order to prevent the forcedmonetisation of his property rights in something so fundamental as his home and will be resisting thewill of an overwhelming majority of consenting subsidiary proprietors who are sharing the costs of thecollective sale proceedings and therefore much better able to withstand those costs.

281 The result is that the Court of Appeal, when it made its orders as to costs in CA120, awardedthose costs as an indemnity as defined by the procedural law. The Court of Appeal considered theplaintiffs’ submissions as to how those costs should be quantified – they submitted on the indemnitybasis – and rejected those submissions. It exercised its discretion judicially to award costs on thedefault standard basis. Whatever the basis, and however the basis is defined, those costs wereawarded under the procedural law on the application of the indemnity principle as an indemnity.Therefore, those costs are deemed by the procedural law, to be an indemnity.

282 The plaintiffs’ case therefore falls outside the exception recognised in Berry. The plaintiffs arepermitted in the proceedings before me to argue that that indemnity was not a true indemnity and toinvite me to award the difference as equitable compensation only if they had no opportunity to seekthose costs against the defendants in CA120.

Plaintiffs considered seeking costs against the defendants in CA120

Plaintiffs considered seeking costs against the defendants in CA120

283 The plaintiffs throughout the collective sale proceedings placed the blame for the defectivecollective sale process squarely at the feet of the defendants. The Court of Appeal in Ng Eng Ghee(CA) accepted that. So the defendants were squarely in the frame when the plaintiffs were makingthe submissions which led to Ng Eng Ghee (Costs). In fact, the plaintiffs did advance a claim for costsagainst the defendants in Ng Eng Ghee (Costs) and recover against them, but only in their capacityas consenting subsidiary proprietors and not as members of the First SC.

284 But the plaintiffs went further than that. Mr Darmawan testified that he actually thought ofasking the Court of Appeal in CA120 to award costs against the defendants personally when he

responded to the Court of Appeal’s invitation for submissions on costs. [note: 55] He changed his mindonly after seeking legal advice. That legal advice, not from his current solicitors, was that he should

“follow strictly what the Court of Appeal asks you”. [note: 56]

285 But it is clear that the plaintiffs did not follow strictly what the Court of Appeal asked of them.The Court of Appeal did not invite submissions on costs from person who were not parties to CA119and CA120. Yet Mr Then and Ms Tan made submissions. Mr Darmawan facilitated their submissions byattaching their submissions to his own submissions. The Court of Appeal did not invite submissions onwhether the consenting subsidiary proprietors should pay indemnity costs. Yet the plaintiffs’submissions argued strenuously that they should pay indemnity costs. The Court of Appeal did notinvite submission on whether HPPL, an intervener, should be liable jointly and severally with the

consenting subsidiary proprietors for costs. [note: 57] Yet the plaintiffs’ submissions argued strenuouslythat they should be.

286 The plaintiffs therefore had a clear opportunity in CA120 to seek an order for costs against thedefendants personally.

Court of Appeal had the power to order costs against the defendants

287 Ms Tan practised as a litigation lawyer, albeit no longer. In her submissions on costs to theCourt of Appeal, she submitted that she and her husband were entitled to costs despite not beingparties to CA120. She rested her submission on Aiden Shipping Co Pte Ltd v Interbulk Ltd [1986] 2WLR 1051 (“Aiden”). She argued that that case was authority for the proposition that the Court ofAppeal could award costs in favour of non-parties, namely herself and her husband. The Court ofAppeal accepted her submission but not on the basis of this case. It relied instead on O 59 r 4(2) andO 59 r 13 to award her and her husband costs (see Ng Eng Ghee (Costs) at [13] – [14]).

288 That is not surprising. Aiden is not an authority to support an award of costs in favour of non-parties. It is in fact the locus classicus on a court’s discretion to award costs against non-parties.The dispute in Aiden arose from two sets of arbitration proceedings. The first set of proceedings wasbetween the shipowners of a damaged vessel and the charterers under the charterparty. The secondset of proceedings was between the charterers and the sub-charterers. The shipowners were notparties to the second set of proceedings. The shipowners’ claim in the first set of proceedings wasdismissed and Hirst J ordered that the shipowners pay the charterer’s costs of the application and thecharterers’ costs of second set of proceedings between the charterers and sub-charterers. Thisdecision was reversed by the Court of Appeal but restored by the House of Lords. The House of Lords’decision is significant because it overruled two English Court of Appeal decisions which held that anorder for costs could only be made against a party to the proceedings in question. A Singapore courttoo has the power to order costs against non-parties: see Chin Yoke Choong Bobby and Another vHong Lam Marine Pte Ltd [1999] 3 SLR(R) 907 (“Chin Yoke Choong”) at [25] – [26] citing Aiden.

289 Mr Darmawan considered inviting the Court of Appeal to award costs against the defendantspersonally. Ms Tan had in her hands the legal basis on which to seek those costs against thedefendants as non-parties to CA120. Doing so was an obvious point. Having failed to grasp thatopportunity when it presented itself, they cannot now bring a separate action to recover those costs.That is the clear effect of Ganesan Carlose and Carroll.

Plaintiffs would be limited to standard costs in any event

290 Even if I am wrong and the defendants are to be treated as third parties to CA120 for thepurposes of this action, the plaintiffs’ claim also fails. If the actions before me are analysed as third-party cases, my analysis of the cases above shows that the consequence would be that the plaintiffswould be limited to costs to be taxed on the standard basis. Thus, just as Carnwath J in BritishRacing, I would not have simply awarded the plaintiffs compensation equivalent to the sums whichthey paid their own solicitors less the sums recovered under the Court of Appeal’s costs orders inCA120. I would also not have ordered that the plaintiffs’ damages be assessed by an AssistantRegistrar. Where compensation is awarded for costs incurred in proceedings in Singapore, theappropriate procedure for quantifying those costs is taxation. And the appropriate basis for taxation –as I have said – is the standard basis.

291 But standard costs is precisely what the Court of Appeal and Tan J have already awarded theplaintiffs. So on this analysis too the plaintiffs’ claims fail.

Paragraph 19 of Ng Eng Ghee (Costs)

292 The plaintiffs found their action on the following passage which appears in Ng Eng Ghee (Costs)at [19]:

For these reasons, we are of the view that the non-appealing parties are entitled to recovercosts for the Horizon Board proceedings (but only the Second Tranche…) and the High Courtproceedings. In arriving at our decision, we have not placed any particular reliance on our findingthat there was a lack of good faith in the en bloc sale. We have already noted that costs aregenerally compensatory and not punitive… Although the conduct of the paying party in theproceedings may have an impact on costs orders (especially where the paying partyunnecessarily complicates or prolongs proceedings, or otherwise acts in a manner amounting toabuse of court processes), the lack of good faith in the transaction does not always call forexceptional treatment. It bears emphasis that our finding in relation to the lack of good faithcentred on the behaviour of certain individuals who are not parties to these proceedings.All said and considered, it would be quite unfair to attribute their lack of good faith and/ordiligence to the respondents for the purposes of assessing costs, thereby increasing theircosts burden substantially.

[emphasis in italics in original; emphasis added in bold italics]

293 The plaintiffs submit that the words in bold italics above show that the Court of Appeal wouldhave ordered the defendants to pay indemnity costs if they had been parties to the collective saleproceedings. They take that as a warrant for commencing these separate proceedings – to which thedefendants are now parties – to recover against the defendants alone their unrecovered costs of thecollective sale proceedings. I do not read this passage that way. The Court of Appeal here isexplaining why it did not give the plaintiffs indemnity costs against the consenting subsidiaryproprietors. There were two reasons for that. The first is the well-established principle that the courtdoes not ordinarily award indemnity costs to punish a losing party for the wrongdoing which is the

subject-matter of the litigation but to compensate the winning party for the additional costs causedby the losing party’s unreasonable conduct of the litigation. The second reason is that the defendantswere not parties to CA120. I do not read this passage as an invitation or as a licence to the plaintiffsto sue the defendants.

294 It is to me preposterous (see [252] above) to suggest that the Court of Appeal would haveconcluded this long, drawn-out, bitter collective sale litigation which pitted neighbour againstneighbour for well over two years by inviting and authorising the plaintiffs to commence freshproceedings to reopen its orders on costs. If anything, this passage reinforces my belief that if theplaintiffs had made an application to the Court of Appeal on the authority of Aiden and Chin YokeChoong to ask that the defendants pay the costs of the collective sale litigation on the indemnitybasis, the Court of Appeal would have heard and determined that application on its merits. Having hadthat opportunity and not taken it, the plaintiffs cannot now seek to do so in these proceedings. Theremust be finality in litigation.

No equitable compensation for unrecovered costs

295 The Court of Appeal made a final decision on the exact issue which is now before me: howshould the plaintiffs be indemnified for their costs of the Collective Sale Application. It is an abuse ofprocess for the plaintiffs to invite me to decide this question afresh just as much as it is an abuse ofprocess for the defendants to suggest that they were not in breach of their fiduciary duties.

Interest accrued on Mr Darmawan’s overdraft facility

296 Mr Darmawan took out an overdraft facility to fund his legal fees. He incurred interest on thisfacility which he now claims as equitable compensation. Even if this facility was used solely used tofund his legal fees, it follows from my analysis above that if Mr Darmawan is not entitled to recoverhis unrecovered costs as equitable compensation, then a fortiori he is not entitled to recover theinterest he incurred on this overdraft facility.

297 In any event, it appears from the evidence that the overdraft was not used exclusively to fundhis legal fees. Mr Darmawan opened this overdraft account some time in April 2007, around the timethat he decided to object to the collective sale. He testified initially that he opened this account to

pay TKQP’s legal fees. [note: 58] However, when it was pointed out to him that the bulk of his

overdraft account was used for other purposes, he responded as follows: [note: 59]

That particular entry, $313,000, for the purchase of my – of a unit at [another development]because I was afraid that if I have to be moved because of the sale of Horizon Towers, I bettermake sure I had a second abode.

298 This seems to indicate that this overdraft account was opened in connection with thecollective sale but not specifically to pay legal fees arising out of the collective sale proceedings. It isnot sufficient for Mr Darmawan to show that the overdraft account was in fact used to pay hissolicitors’ legal fees. He must show that but for the defendants’ breach, he would not have incurredinterest on this overdraft account. Mr Darmawan’s argument answers a slightly different causalenquiry: his argument is that but for the collective sale, he would not have incurred interest on thisoverdraft account. The collective sale was set in motion without any breach of duty by thedefendants. Mr Darmawan has not shown the necessary causal connection between the defendants’breaches and the interest he incurred in the overdraft account.

299 In any event, the loss incurred via interest on an overdraft is a different type of loss than

would have been foreseeable. A fiduciary who breaches his duties may foresee that an object of hisduties would incur costs as a result. But it is not foreseeable that the object of his duties would incurinterest on an overdraft to fund the legal battle.

300 Accordingly, I find that there is no basis for awarding Mr Darmawan equitable compensation forthe interest incurred on his overdraft account.

Conclusion

301 I dismiss each plaintiff’s claims in the consolidated action before me.

302 I will hear the parties on costs.

[note: 1] Statement of Claim dated 24 December 2009, para 38.1.

[note: 2] Plaintiffs’ Closing Submissions dated 12 November 2012 at [206].

[note: 3] Affidavit of evidence in chief of Rudy Darmawan filed on 14 September 2012 at [79].

[note: 4] Plaintiffs’ Closing Submissions dated 12 November 2012 at [206].

[note: 5] Affidavit of evidence in chief of Rudy Darmawan filed on 14 September 2012 at [74] and [79].

[note: 6] Plaintiffs’ Closing Submissions dated 12 November 2012 at [206].

[note: 7] Affidavit of evidence in chief of Tan Kah Gee filed on 14 September 2012 at [32]

[note: 8] First defendant’s closing submissions, 9 November 2012, p 74, [103].

[note: 9] Plaintiffs’ Closing submissions at para 33 to 39.

[note: 10] Plaintiffs’ Closing Submissions at para 38.

[note: 11] Plaintiffs’ Closing Submissions para 62 to 69.

[note: 12] Statement of Claim, para 10.2, 10.3, 10.4, 13 and 14.

[note: 13] 3AB1090.

[note: 14] 3AB1084.

[note: 15] AS-29, Arjun Permanand Samtani’s affidavit of evidence in chief.

[note: 16] Transcript 26 September 2012, page 122 line 20 to 23.

[note: 17] Para 112 of Tan Kah Gee’s affidavit of evidence in chief and Tab 25-27 of exhibit TKG-13.

[note: 18] Para 107 of Tan Kah Gee’s affidavit of evidence in chief.

[note: 19] AS-30, Arjun Permanand Samtani’s affidavit of evidence in chief.

[note: 20] Notes of Evidence, 17 September 2012, p 84 line 14 to p 85 line 10.

[note: 21] Notes of Evidence, 17 September 2012, pp 84-85.

[note: 22] Ibid., p 86, lines 20-25.

[note: 23] Ibid., p 54, line 24 to p 55, line 4; p 68, lines 2-7

[note: 24] Ibid., p 87, lines 1-5.

[note: 25] Ibid., p 87, lines 12-13.

[note: 26] Ibid., p 87, lines 17-19.

[note: 27] Ibid., p 69, lines 17-18.

[note: 28] Ibid., p 89, lines 5-13.

[note: 29] Ibid., p 88, lines 14-25.

[note: 30] Ibid., p 92, lines 1-6.

[note: 31] Ibid., p 119, line 9.

[note: 32] Ibid., p 118, lines 8-10.

[note: 33] Exhibit P2A, para 25.

[note: 34] Notes of Evidence, 21 September 2012, p 114 line 18 to p 115 line 4; p 116, lines 13-17.

[note: 35] Ibid., p 77 line 13.

[note: 36] Notes of Evidence, 24 September 2012, p 95, lines 6, 11-21.

[note: 37] Plaintiffs’ opening statement, para 44 and Notes of Evidence, 17 September 2012, p 54, lines14-16.

[note: 38] Notes of Evidence, 18 September 2012, p 37, lines 5-12.

[note: 39] Notes of Evidence, 17 September 2012, p 139, lines 1-8.

[note: 40] Notes of Evidence, 24 September 2012, p 110, line 25 to p 111, line 12.

[note: 41] Ibid., p 160, lines 7-8.

[note: 42] Notes of Evidence, 26 September 2012, p 65, lines 4-7.

[note: 43] Ibid., p 66, lines 1-5 and 18-21.

[note: 44] Exhibit P2A, paras 15-16 of Rudy Darmawan’s submissions on costs.

[note: 45] Exhibit P3, p 6 of Rudy Darmawan’s further submissions on costs.

[note: 46] Exhibit P2A, para 10 of Jasmine Tan and Then Khek Koon’s submissions on costs.

[note: 47] Exhibit P3, para 16 of Jasmine Tan and Then Khek Koon’s further submissions on costs.

[note: 48] Exhibit P2A, para 4 of Jasmine Tan and Then Khek Khoon’s submissions on costs.

[note: 49] Mr Rudy Darmawan’s submission on costs dated 8 April 2009 at [23].

[note: 50] Mr Rudy Darmawan’s submission on costs dated 8 April 2009 at [6(i)].

[note: 51] Mr Rudy Darmawan’s submission on costs dated 8 April 2009 at [13(i)].

[note: 52] Mr Rudy Darmawan’s submission on costs dated 8 April 2009 at [6(ii)].

[note: 53] Mr Rudy Darmawan’s submission on costs dated 8 April 2009 at [13(ii)].

[note: 54] Notes of Evidence, 18 September 2012, p 18, lines 9-18 and p 19, line 12 to p 20 line 2; p20, lines 14-21.

[note: 55] Ibid., p 84, lines 9-16.

[note: 56] Ibid., p 84, lines 15-25.

[note: 57] Exhibit P2A, para 13 of Rudy Darmawan’s submissions on costs.

[note: 58] Notes of Evidence, 18 September 2012, p 170, lines 10-17.

[note: 59] Ibid., p 171, lines 15-19.

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